January 15, 2025
2025 Cash Poor Report Press Release
New Data From The “2025 Cash Poor Report” Shows that Fintechs Continue to Be The Cheapest Loan Option for Cash Poor Americans.
Findings highlight the need to embrace innovation, and how Americans borrowing money from traditional players like subprime credit cards paid billions more in “junk fees” in 2024 than in 2023.
Los Angeles, CA, January 15, 2025 — SoLo, the US’s largest community finance platform, is announcing today the release of The 2025 Cash Poor Report, an industry-first whitepaper that examines Americans living paycheck to paycheck and the true total cost of borrowing money over a 12-month period from common options to cover unplanned expenses. This year’s report reveals that Americans with little or no savings paid more than $39 billion dollars in fees–beyond the advertised Annual Percentage Rate (APR)–when seeking short-term capital, a 34% increase from 2023. Subprime credit cards emerged as the most expensive option again, while SoLo and other fintechs continued to rank as the most affordable options for the second consecutive year.
We commissioned this study to promote a more comprehensive understanding of this consumer and to shine a light on a true total consumer cost. The report discusses the cost in terms of opportunity cost and true total cost –what we call The Total Cost Rate that empowers consumers to better understand how much borrowing truly costs and what options they have. The 2025 Cash Poor Report was conducted in partnership with Opinium Research, Pace University, The Global Black Economic Forum, The Aspen Institute, and the Independent Women’s Forum. The study surveyed 2,000 U.S. as representative sample of American adults spanning Gen Z, Millennials, Gen X, Boomers and the Silent Generation and found that when comparing fees as a percentage of a $1,000 loan:
- The APR rate continues to not include late fees, origination fees, subscription fees, transaction fees and other expenses that can create debt traps for consumers in a financial crisis. Fintechs with newer fee structures like tips and donation are more affordable than APR driven products.
- Unplanned expenses cost the average American family living paycheck to paycheck $1,825 a year – a decrease from $1,900 in 2023. The most popular planned expenses include rent and mortgage payments, utility bills, gas, and groceries.
- Subprime credit cards have the highest average with the greatest variability. Looking at the data, these credit cards remain the most expensive option for unplanned expenses, with the average cost rising to 48%, up from 41% in 2023. Maximum fees can reach a staggering 90% of the principal borrowed, driven by high total fees, penalties, and monthly maintenance fees. These cards account for $19.6 billion in aggregate borrowing costs in 2024, marking an $8 billion increase from last year.
- Payday loans feature the highest minimum borrowing cost among all options at 22%, with an average cost rising to 35% (from 33% in 2023). Maximum costs reach 67%, fueled by origination fees, late fees, and penalties. Aggregate costs for payday loans increased to $6.7 billion in 2024 from $6.2 billion in 2023, reflecting the ongoing financial burden these loans place on borrowers.
- BNPL options remained relatively affordable this year for borrowers, with minimum fees averaging just 2%. However, costs can climb to 45% under maximum scenarios due to interest and additional fees. However, BNPL remains a manageable option with minimum costs hovering near 0%. BNPL borrowers experienced a significant decline in annual borrowing, from $2,100 in 2023 to $1,450 in 2024 possibly due to regulatory scrutiny.
- Earned wage access solutions offered one of the lowest average borrowing costs this year at 13%, but costs can rise to 26% due to optional tipping and transaction charges. Aggregate borrowing costs for payroll advances increased to $3.8 billion in 2024, up from $3.2 billion in 2023.
- Bank Small-Dollar loans is a new offering emerging in 2024. It had the 3rd highest costs just behind subprime credit cards and payday loans but with significant barriers to entry. They averaged a 25% borrowing cost this year, with a minimum fee of 12%, largely due to mandatory account balance and deposit requirements. Aggregate costs for bank small-dollar loans are estimated at $5.8 billion in 2024. While these loans are more affordable than payday options, entry barriers limit their accessibility for many borrowers.
- P2P loans like SoLo remained the most affordable option in terms of aggregate borrowing costs, totaling just $1 billion in 2024. This marks a decrease from $1.3 billion in 2023, driven by reduced borrowing amounts. While borrowing can be cost-free for disciplined users, average costs can reach 17% due to tips and late fees.
- After comparing what the true total cost of borrowing money is when using payday loans vs. credit cards, and fintechs – SoLo was the cheapest option to borrow money
- Friends & Family: 43% of those surveyed noted borrowing money from family and friends to pay for unexpected expenses – up from 38% in 2023.
“Being cash poor is a way of life for most Americans, this creates vulnerability in being able to manage variable and unplanned expenses,” said Rodney Williams, President and Co-Founder of SoLo. “The vulnerability is not the time for a lack of options but rather an opportunity for innovation and competition. We want Congress and regulators to embrace innovation and allow more convenient and accessible frameworks given the same playing field as traditional financial institutions.”
To download the full report and learn more about the 2025 Cash Poor Report, please visit www.theCashPoor.com
About SoLo Funds
SoLo is the leading finance platform focused on underserved communities. Members borrow on their own terms, and lend to make industry leading returns or a social impact. As the only Black-owned fintech Certified B Corp in the U.S. and Canada, SoLo has emerged as the new financial services leader on pace to deliver $1B back into underserved communities by Q1 ‘24. The financial system has failed our communities, excluding them from returns and access to short term cash. SoLo created something different, something more human. They went back to the basics, creating a community where people could support each other financially. SoLo calls this community finance.
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