Payday loans are offered at neighborhood offices of payment advance companies. They are aimed at the many Americans who live from paycheck to paycheck and may occasionally need extra funds to cover bills that cannot wait until the next payday. The amount of a payday loan is typically small, between $100 and $400, and the loan is short-term, with repayment usually expected within a few weeks.

For example, a person might go to a payment advance office to borrow $200. The borrower will give the company a check that’s been post-dated to the date of his or her next payday in the amount of $240, which represents the total amount of the loan plus the company’s service fee. On the loan's due date, the borrower can either go to the office to repay the loan with cash or can have the amount withdrawn electronically from a bank account. If the borrower doesn’t have sufficient funds in a bank account to cover the loan amount by the due date, a rollover fee will be added to the loan amount. Such fees will continue to increase until the loan is repaid.

Some finance industry critics see payday loans as a form of legal usury with interest rates that, in some cases, have topped 500% annually. As a result of such controversy, payday loans aren't available in all states, and traditional financial institutions refuse to include short-term high-interest loans as part of their day-to-day operations no matter how lucrative they might be.

Payment advance companies claim to offer a valuable service that provides emergency funds for working-class families who can't find help anywhere else. Furthermore, many investors on Wall Street now look favorably upon these companies, viewing them as a growing (and respectable) part of the financial business sector. Critics in government, however, are crafting legislation aimed at placing caps on payment advance interest rates, particularly as applied to customers who are members of the military.