The payday cash advance business didn't exist 15 years ago, but today there is a payday cash advance store on every corner. Many people use these short-term, unsecured loans to help fill the gaps until payday. These loans serve as a successful solution to cash emergencies like car repairs, hospital stays, groceries, and other unseen expenses. Sounds to good to be true? Maybe or maybe not. Let's explore in more detail.

Many payday cash advance loans carry an average annual percentage rate (APR) of 474 percent with some lenders charging rates as high as 800%. Payday loans can result in a vicious cycle that many end up borrowing from Peter to pay Paul, having to go from store to store to keep the checks clearing.

The payday loan industry paints a pretty picture. We see the ads on TV of middle-income families who need cash fast for emergencies. But the reality is that most middle-income families have lower cost options to solve temmporary cash-flow problems. Most of the customers are lower income families with bad credit and little options to choose from. It has been estimated that lower income, urban areas have an average of three times as many payday loan locations as in suburban areas with higher median incomes. Many of the customers have an annual household income of $25,000 to $40,000.

State and federal governments have launched inquiries into the predatory practices of payday lending stores. Some 20 states have capped the interest rates that lenders can charge. But despite these regulations, many financial experts say there is a need to educate consumers to steer clear of spending beyond their means.