COVID-19 Economic Displacement and AFS Use: Evidence from the 2020 Collaborative Multiracial Post-Election Survey

This study examines the use of alternative financial services in the context of COVID-19-induced economic displacement. We utilize data from the 2020 Collaborative Multiracial Post-Election Survey and the ABC-X model of family stress and coping to examine how economic displacement, prior AFS use, and sociodemographic factors collectively promote AFS utilization. This study examines four types of financial coping strategies: credit cards, payday loans, public benefits, and borrowing from family and friends. Of these, payday loan use represents the primary indicator of AFS reliance. Our findings indicate that borrowing from friends and family is a significant predictor of payday loan usage. Furthermore, prior use of AFS, such as payday loans, check-cashing services, and pawnshops, strongly predict future AFS use. This study also finds a negative relationship between ethno-racial identity and AFS use which contradicts much of the existing literature. We find that lower levels of education and living in large urban areas are predictors of AFS use. This study highlights how the pandemic exacerbated financial vulnerabilities and validates the need for education and advocacy to prepare the most vulnerable to break cycles of AFS use.