Stagnant wages, a rising cost of living, and increasingly irregular schedules routinely force many working Americans onto a financial knife’s edge; they’re able to pay their usual bills but lack a buffer to handle even small financial shocks. Part of the problem is that most U.S. workers are paid biweekly, and it can take as much as a week for a paycheck to clear, making the wait for compensation even longer. In addition, many workers lack the credit scores to qualify for standard market-rate loans. So to make ends meet or cover unexpected bills, they often rely on payday loans, auto-title loans, and bank overdrafts—high-cost instruments that may push them further toward financial ruin. Economic downturns, such as today’s pandemic-related recession, only increase dependence on these services.
A version of this article appeared in the November–December 2020 issue of Harvard Business Review.