Americans with payday loans spent or saved their tax rebates,rather than using it to pay off debt

In 2001, the U.S. government gave a major tax rebate to Americans of $300 per person. In new research Paige Marta Skiba examines the impact of this rebate to those with outstanding payday loans, which can have annualized interest rates of up to 600 percent. In a study of nearly 47,000 payday loan borrowers, she finds that rather than using the rebate to pay back debt, most spent or saved their rebate, and did not decrease their loans by a large amount. She argues that while payday loans may appear to make financial sense for those who are unable to get credit from other sources, the onerous interest payments may help to drag them into a cycle of revolving debt