Payday loans are small short term loans offered by a merchant who uses a post dated check or a per-authorized electronic funds transfer as collateral. The loans are generally two weeks in length or shorter. Typical fees to the consumer range from 15 percent to 25 percent of the face amount of the advance. The process is streamlined offering quick access to credit with only minimal lending requirements.

The loans most often require balloon payments which mean the entire loan balance and all fees charges are due on the borrowers next payday. This creates a financial hardship for many borrowers who cannot afford to repay the entire loan balance at one time. Many are forced to rollover the loan adding additional fees and charges.

These loans are predatory in nature,however credit unions recognize that many of their members are using them. For this reason, credit unions are offering a wide range of products designed to provide a lower cost alternative to existing members and to reach non-members in the community who need access to more affordable options. Further they are providing longer term products designed to help members out of the revolving trap of payday loan usage.