Home > Uncategorized > 4 Ways Peeps Are Like Payday Loans

Comments 2 Comments

You see them at every grocery or drugstore checkout line — brightly colored Peeps calling to you from the display. Does anybody ever go to the store with Peeps on the list? Certainly nowhere near as many people as those who come home having purchased them.

They’re not unlike payday loans — stay with me a minute, even if you love Peeps (and we certainly do). Payday loans are never on anybody’s list of ideal ways to make ends meet. And yet, payday lending is a big business. Somehow, similar to the bright-colored marshmallow chicks we didn’t plan to buy, we may find ourselves in payday loan debt we didn’t plan to go into.

Here’s how Peeps and payday loans are similar.

1. One Almost Inevitably Leads to Another

The Peeps are technically one big marshmallow that can be easily divided into smaller “servings.” But they are joined. With payday loans, you typically sign up for one. With a plan to pay it off and be done with it. Only that probably happens as often as someone opens a package of Peeps and consumes only one. Just 15% of borrowers pay within the initial 14 days of borrowing (when they first come due), according to the Consumer Financial Protection Bureau. Even then, you’ll have already paid origination fees, and probably interest (as an annual rate) of more than 100%. While it’s true that some people pay them off right away, it’s reasonable to assume that just about everyone intends to. It’s just hard to do it. The financial situation that made you consider taking out such a loan usually isn’t going to change so dramatically in a couple of weeks that you can pay your regular bills plus pay off your payday loan. And the lender would be happy to extend it for you (for a price).

2. They Last Just About Forever

How many centuries can Peeps last? The Huffington Post checked to see what would happen to Peeps left open on a desk, for a year. Oh, they changed a little bit, and they were definitely beyond their “best by” dates, but the difference was not terribly dramatic. (And interestingly, the older the Peeps, the harder they were to separate.) And payday loans? A year later, you may still be dealing with them. Or, maybe when you gave up on paying, the bill was sent to collections. That “temporary” loan, taken out to tide you over, can cost many times what you borrowed, and can come back in the form of a collections account that can hurt your credit. Like Peeps, a payday loan doesn’t die easily.

3. They Can Be Hazardous to Your Health

No one who buys either product is doing it because they believe it’s good for them. Besides, it’s short-term. Peeps won’t be around forever anyway. Or at least they won’t be tempting you at the checkout forever. Payday loans just seem simpler than worrying about what you’ll do in the few days before your next paycheck. The loans are normally under $500, which seems like a fairly small indulgence, and unlikely to do real damage to your finances. And if you’re in the 15% of people who pay the loan back within 14 days, it shouldn’t hurt your credit. It isn’t always destructive to your credit. Peeps, in relatively small, seasonal doses, are probably not going to hurt you. But if your goal is better physical or financial health, Peeps or payday loans can, at the least, slow down your progress. And the potential is there for more damage than that.

If you are using payday loans, it can be helpful to keep track of your credit. By checking your free annual credit reports and monitoring your credit scores (which you can do for free with a Credit.com account), you can be more aware of the impact your financial decisions have on your credit over time.

4. They’ll Appeal to You in a Moment of Weakness

As easy as it is to add Peeps to a shopping cart, it’s not entirely outside your control. You may, for example, have more control on your way home from the gym. And as for payday loans — if you’ve been digging out of debt the old-fashioned way, and an unexpected expense throws you for a loop, you may be far less inclined to take out a high-priced loan for “just a few days.” Either way, you’ve worked far too hard to let all that effort go to waste. (Though if you do slip, it’s so much easier to get back on track than if you hadn’t been taking care of yourself in the first place.)

Happy Springtime.

More on Credit Reports and Credit Scores:

Image: arinahabich

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • http://www.Credit.com/ Gerri Detweiler

    There is talk of the Post Office getting into more financial services to serve the underbanked and unbanked. And I wouldn’t be surprised if we saw something from Wal-mart. Some credit unions and a few banks are also offering small dollar loans at reasonable interest rates. And there are some non-profits making similar loans. So we may see more competition in the future.

  • Jason

    This comparison is ridiculous. People must actively seek out, apply and be approved to egg a loan. They are not convenience items you can pick up without a good deal of thought and effort.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team