Meant bridge the borrower's cash flow gap between paydays, the payday loan, also called paycheck advance is a small, short-term loan (in the U.S., it is usually up to $1,500). Often referred to as cash advance, the term of payday loans can also refer to cash provided against a line of credit such as a credit card which was planned beforehand. People who get such a loan are offered this credit in cash and the borrower's post-dated check secures it so that it can include the original loan principal and increased interest. The borrower's next payday is the same day the maturity date occurs. This is the time when the check is released or when the electronic withdraw takes place unless the borrower first repay or service the loan in person.

Although this is a typically loan for small business and franchises, large businesses are also offered a variation on the payday advance. Customers whose paychecks are deposited electronically are offered a "direct deposit advance". Preset small cash is received beforehand when consumers ask for direct deposit advance. The advance amount can be then sent away but the bank will charge fee for the advance (usually around 10-20%). There are firms such as H&R Block partner, which are income tax preparation firms, whose lenders will provide with a refund for the beforehand loans to filers. These loans cannot be called payday loans as they can be repaid once the borrower's income tax refund is receive and not at his next payday. Still there are certain similarities as far as the credit and cost characteristics are concerned.

Nevertheless this is a subject of controversy due to the credit cards that have a high interest rate. It is though that such payday loans are favorising mostly the young and the poor as well as the low-income communities. They are thought to not understand the money’s time value. There is also an interesting comparison between these loans and loan sharks since they have in common the high interest rates. This go up to 250% or even more if calculated on an annualized basis.