Americans Living Paycheck to Paycheck Paid $39B in Junk Fees: 3 Ways To Avoid Them
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Gabrielle Olya
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Amen Oyiboke
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Americans who live paycheck to paycheck are more prone to borrowing money, which exposes them to predatory “junk fees.” A recent report conducted by SoLo Funds found that American consumers who live paycheck to paycheck paid over $39 billion in junk fees when borrowing money last year — an increase of 34% compared to the previous year.
“We believe all Americans are facing this issue, but it impacts Americans living within limited budgets greater,” said Rodney Williams, president and co-founder of SoLo Funds. “The problem lies in the fine print of traditional financial products.
“Traditional cost measures, like annual percentage rate (APR), fail to capture the full cost,” he continued. “Late fees, origination fees, penalties and even annual fees are excluded from the APR calculation, leaving borrowers unaware of the true costs until it’s too late.”
The report found that the average borrower may end up paying 48% more than they initially borrowed when using subprime credit cards or over 30% on payday loans.
“The traditional system is broken,” Williams said.
Here are a few ways to avoid junk fees if you need to borrow money.
Read the Fine Print Before Taking Out Any Loan or Credit
Many Americans only pay attention to the APR when borrowing money, but this doesn’t capture the full cost.
“Know all the fees, which include APR, subscription fees, late fees, fast payment processing fees, application fees, monthly maintenance fees, new card fees and ATM fees,” Williams said. “Our 2025 Cash Poor Report found that Americans paid $39 billion dollars a year in additional fees independent of the APR to financial platforms.”
Ideally, you should search for products with a simple and transparent fee structure.
“Use fintech solutions with simple fee structures that do not accrue or compound over time,” Williams said. “This is easier to understand and manage in difficult scenarios.”
Always Pay Bills on Time
Late fees are a common junk fee — and they are easily avoidable.
“If you use credit, never pay late,” Williams said. “Fees [such as late fees] cost billions. Our Cash Poor Report found that credit cards cost consumers $11.5 billion in fees independent of the APR. Not to mention your credit score will drop when payments are past due, which only reduces your borrowing power.”
Set a reminder to pay all of your credit card bills on time, even if you can only make the minimum payment.
Don’t Charge What You Can’t Pay Back in Full
Ideally, you’ll be able to pay all of your credit card bills on time and in full.
“Carrying a balance can lead to expensive interest charges and increase your debt,” Williams said. “Only use credit that you can pay back in full. When you do this, you will never pay interest. Stay vigilant after your purchase is complete.”
Williams said that you need to look at credit and loans as a crutch — not an extension of income.
“Credit cards are convenient and they make it all too easy to overspend,” he said. “If you go on spending sprees without a plan to pay them off, you could end up having to declare bankruptcy — which will harm your credit history for up to 10 years.”
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