Modern finance · 1950s–1990s

1990s

Payday loans

Storefront lenders advance cash until payday for a fee that works out to hundreds of percent a year.

Through the 1990s, payday lenders spread across the US. A borrower writes a post-dated check, gets cash, and repays on payday. A typical fee of $15 per $100 for two weeks is close to 400% a year.

Many borrowers roll the loan over again and again, paying fees without shrinking what they owe. Some states cap or ban the loans.

Ideas it gave us

• 🏦 Interest rate

  An interest rate is the price of borrowing money, stated as a percentage of the loan per year. For savers it is the reward for lending their money to a bank.

• 🧭 Emergency fund

  An emergency fund is cash set aside for surprises, like a job loss, a car repair or a medical bill, so you don't have to borrow or sell investments at a bad time.