This is a slightly modified version of something I wrote for my old blog in 2005.
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Payday loans work like this:
Let's say Joe is short $100 and has maxed out his credit cards. Joe goes to a payday lender. The lender gives Joe the money, and Joe writes a check for $100 plus a surcharge of, say, $15, dated two weeks in the future. Between now and two weeks, Joe gets his next paycheck, and the loan is covered.