It’s payday. Mortgage, electric and water bills are due. Your daughter is sick and the doctor has prescribed medication not covered by your health insurance. To top it off, a few days ago someone smashed the car window — just in time for the storm warning.

Despite a decent job, you can barely make it from one paycheck to the next, let alone fund your rainy day fund. Now, suddenly, that rainy day is here.

You remember seeing TV ads touting emergency cash advance loans approved in hours, with or without  good credit. It seems a good quick fix, just this once. You’ll pay it back on your next payday. But two weeks turns into five months, and the payback on an initial $375 loan costs you nearly $1,000 by the time you add on the triple digit interest rate and fees.

Related: How to Create a Rainy Day Fund

“A long-term debt trap”

This scenario — or some variation of it — affects more than 12 million Americans each year who turn to the safety net of payday loans. The monies are promoted as quick and easy cash advances (or direct deposit loans) issued by a $46 billion industry that has seen explosive growth since its inception in the 1990s. In fact, payday loan shops are more ubiquitous than McDonald's.

Payday loans cater to low-income customers, but the new face of pay loan customers is increasingly middle class. The nonprofit Urban Institute recently found that households with incomes of $50,000-plus, unable to make ends meet, also are turning to payday loans in increasing numbers.

Are you among them? If so, you may already know that the typical payday loan of $300 to $500 comes with triple-digit interest rates ranging from 391 percent to 521 percent, annually adding more than $10 billion from fees to payday industry coffers.

“Payday companies market their loans as a quick fix to a short term problem, but in fact, these loans are a long-term debt trap,” says Diane Standaert, director of state policy for the Center for Responsible Lending (CRL), a nonprofit organization designed to protect homeownership and family wealth.

“The payday industry is predatory by design,” says Standaert. “It thrives on a business model that banks on borrowers not being able to repay on time. When the borrower fails, the lender succeeds. That’s what drives the business.”

Some call it churn, a series of rollover loans that evolve into spiraling debt. If you are a typical borrower, you’ll take out 10 loans over a 12-month period and remain in hock for roughly 212 days of the year.

More drawbacks of a fast cash loan

If you take out an initial payday loan, you are most likely using it to cover key household expenses rather than an emergency, say experts. An often-cited study by the Pew Charitable Trust on payday lending found that nearly 70 percent of consumers needing a fast cash loan use it to cover basic costs such as gas, food and utility bills.

But the bigger trouble starts there. Soon you may be needing a payday loan to cover the payday loan.

“These are not once in a blue moon, quick or short-term loans,” says Standaert. “Our data shows that 75 percent of the borrowers take out a loan within two weeks of the previous loan payout. These are not for ten separate emergencies. The payday loans are causing the emergency because people need the next payday loan to payoff the one before it. Only 2 percent of all borrowers take out one loan and pay it off on time.” Imagine all the family stress that can cause. 

CRL and others warn that there are additional consequences often overlooked when borrowing from payday lenders. Most payday loans require direct access to a bank account, with automatic deductions to pay for loans that come due. That can lead to overdraft fees, the closure of a bank account and delays in the ability to pay other bills.

Are payday loans ever worth it?

Stakeholders in the payday loan industry say they have gotten a bad rap and argue that payday loans serve a vital role in assisting the working poor and consumers unable to get credit or even bank accounts. Christopher Westley, professor of economics at the Florida Gulf Coast University, agrees, going so far as to call payday lenders “heroic.”

“They serve a market not served by the traditional banking sector,” says Westley. “The industry is helping people who need money and have few, if any, alternatives. The interest rates are higher because the risk is higher. That is the approach of the regulated and traditional banking and credit industry.”

“And keep in mind, taking out a payday loan is voluntary,” Westley adds. “No one says you must use our service.”

Should you ever consider a payday loan? A handful of experts say there are a few instances in which it can cost less than the alternatives (if you pay it back with your next pay check).

These include needing to write multiple checks but having no money in the bank (think $35 overdraft fees for each bounced check), having to pay court fees or tickets to keep your drivers’ license or needing to pay for utilities to keep them from being shut off (fines, new deposits and turn-on fees for utilities are hefty).

Alternatives to payday loans

But if you need a payday loan on a regular basis, look elsewhere. Alternatives are scarce, but they do exist. Organizations such as CRL and government researchers suggest the following:

    Check with a credit union or small loan company for possible options. Some banks also offer short-term loans. Explore whether your bank offers overdraft protection for checking accounts.

    Consider a cash advance on a credit card. It may come with higher interest rates, but it is more appealing when you consider payday loan fees that have been reported as high as 700 percent.

    Seek input from non-profit groups, available in every state, for guidance on credit or low cost loans. Do not rule out requesting an advance from your employer.

    Consult with family and friends to determine whether they can offer a loan. Even some religious organizations provide financial counseling and loan options.

    Tighten the belt buckle: Spend less and buy smarter. Make a realistic budget and weigh necessary and unnecessary expenditures. If possible, try to save.

Related: How to Recover From Holiday Overspending

Payday loans have recently become a hot button issue at the state level. Numerous states have imposed regulation on payday lending, and 24 states have imposed rate caps or restrictions on payday lenders. Although 35 states still allow payday lending with an average of 300 percent interest on two-week loans, the District of Columbia and six other states — Arkansas, Arizona, New Hampshire, Ohio, Oregon and Montana — have enacted reforms.

More recently, the federal government has embraced the issue with an eye toward establishing new rules to protect borrowers from payday loan debt traps. In March, the Consumer Financial Protection Bureau (CFPB) proposed initial guidelines to regulate the payday loan industry.

Central to the new rules are interest rate caps of 36 percent and proof that borrowers can repay without being pushed into a debt spiral that leads to repeat, rollover loans.

“We fully support interest rate caps of 36 percent and provisions that would allow loans only if they are truly affordable to consumers,” said CRL’s Standaert. “But we also encourage borrowers to seek alternatives — because anything is better than a payday loan.”

Related: Struggling Financially? 5 Ways to Avoid Foreclosure

Carolyn is an award-winning investigative journalist, writer and editor with more than 25 years of experience in newspapers, magazines, digital journalism, documentary films and books. She was a longtime contributor to The New York Times, covering national and foreign news, and has written for numerous publications including Mother Jones, Forbes, The Nation, and The Washington Post. Her expertise ranges from health, biotechnology and science reporting to breakthrough technologies in Silicon Valley. She continues to freelance and report on finance for Blueshift Research. Her favorite safety tip: don't walk barefoot in the urban outdoors (and buy flood insurance).