NEW YORK (CNNMoney) -- Americans tempted by the promise of fast cash are paying an average of $520 a year in fees for short-term credit lines known as payday loans.
An estimated 12 million Americans take out payday loans each year, according to the Pew Charitable Trusts' Safe Small-Dollar Loans Research Project.
On average, these borrowers take out eight loans per year, averaging $375 each, the survey based on focus groups and telephone interviews found. Over the course of two weeks -- when payday loans typically come due -- fees averaged $15 per $100 borrowed, amounting to a 391% annual percentage rate. Most lenders display costs as fees, but they can also be reflected as interest rates.
Because of the small-dollar amounts extended and the relatively easy access -- no credit check is required -- payday loans are often marketed as "fast cash" to cover emergency expenses that arise before a borrower's next paycheck arrives, which is typically two weeks, Pew said.
But Pew's study reveals that most borrowers actually use payday loans for regular living expenses -- not for emergencies, as many payday lenders advertise. Plus, the average borrower takes out eight loans and is indebted about five months of the year because they continue to renew the original loan.
