Center on Assets, Education, and Inclusion

There is concern that the increasing accessibility of alternative financial services in communities across the US is risking individuals' financial health by increasing their use of these high-cost services, potentially trapping them into carrying burdensome debt, damaging their credit scores, or delaying payments on rent or utilities. This study uses restricted-access, zip code data from a nationally representative sample of nearly 24,000 adult individuals to examine whether the concentration of alternative financial services within communities relates to individuals’ use of these services. Generally, the assumption holds that increased access is associated with increased use; however, there are differences in how individuals use alternative financial services based on their annual household income. Modest and highest income individuals are more likely to use these services when they live in communities with higher concentrations of alternative financial services. For lowest income individuals, higher concentrations are associated with their more frequent or chronic use of these services. Local, state, and national policies are needed to provide safe and affordable financial services within communities and to regulate the expanding alternative financial services industry.