Running short of money before the next paycheck can force a consumer into making choices: let the checking account go negative, delay a bill, carry a card balance or seek additional credit.
Consumers making those choices are also more likely to encounter future difficulty accessing credit.
A Consumer Bankers Association analysis released Wednesday (Oct. 8) found that 60% of consumers who paid an overdraft fee in the previous 12 months also reported being denied credit during the same period. The rate was roughly 1.5 times that of consumers who did not report paying an overdraft fee. CBA based its analysis on the Federal Reserve’s 2025 Survey of Household Economics and Decisionmaking.
The relationship puts two forms of household financial pressure in the same frame. Consumers who paid for access to money beyond their checking account balance were also much more likely to report that a lender had turned them down.
The Federal Reserve data show that overdraft use was concentrated among consumers with lower and middle income levels. Twelve percent of banked adults paid an overdraft fee in 2025. The share reached 20% among consumers with family incomes between $25,000 and $49,999 and 17% among those earning less than $25,000. It fell to 6% among consumers earning $100,000 or more.
When the Cash Cushion Runs Out
PYMNTS Intelligence research documents the limited reserves behind many of those monthly decisions.
Among Gen X consumers, 38% have $1,000 or less in readily available savings, including 18% with none. Fifty-six percent have $5,000 or less. In April, 30% said they had saved less during the preceding three months, while 17% had saved more. Among those saving less, 62% cited rising regular expenses.
The pressure extends beyond one generation. Recent PYMNTS Intelligence research found that 28% of households encountered an unexpected expense of at least $1,200 during the previous 90 days. The rate rose to 34% among consumers living paycheck to paycheck and struggling to pay bills.
Overdraft is one piece of a broader search for liquidity when available cash does not cover the bill. Earlier PYMNTS research found 20% of consumers had used overdrafts because of insufficient bank-account funds, with the incidence substantially higher among credit-marginalized consumers.
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Credit Becomes Part of the Same Calculation
The Fed and PYMNTS research glean data from roughly similar timeframes. PYMNTS Intelligence surveyed 2,049 U.S. consumers in June 2025 for its Consumer Credit Economy report detailing credit access. The Fed fielded its 2025 SHED from Oct. 17 through Oct. 28.
Both found weaker credit access, or weaker confidence in access, among consumers under greater financial pressure.
PYMNTS Intelligence found that only 41% of consumers earning less than $50,000 believed they would probably or definitely be approved for a new credit card. The comparable shares were 63% for households earning $50,000 to $100,000 and 67% for those above $100,000.
Concern about approval affects behavior before an application is filed. More than 4 in 10 respondents lacked confidence that they would receive a new credit card, including 25% who expected rejection and 18% who were unsure.
Credit also occupies a direct place in household cash management. Among consumers interested in obtaining a credit card, 19.1% cited having money available for emergencies, 9.5% cited everyday expenses and 7% cited better cash flow management.
The checking account records much of this activity: income arriving, recurring bills leaving, balances falling and overdrafts occurring. Lenders are putting more of that information into underwriting, but are gaining more of a holistic picture than might otherwise be obtained.
Recent PYMNTS coverage of cash flow underwriting detailed the use of bank transactions and cash flow information alongside conventional credit data. The information includes regular deposits, average balances and overdraft history.
The approach moved further into consumer lending this week. Experian launched a cash flow consumer reporting agency that organizes consumer-permissioned bank transactions and balance information for underwriting. The company said combining cash-flow information with credit data improved predictive performance by as much as 40% and raised approvals by as much as 25% without changing risk tolerance.
Plaid also introduced new cash flow underwriting models, saying its LendScore 2 predicted repayment ability with 42% greater strength than traditional credit data alone.
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