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For many Americans, advance payment loans, sometimes called payday loans, are a way to pay the bills when they have run out of cash before their next paycheck.

While this is not an ideal situation, it’s a reality for millions of working Americans each year.

Assuming cash is needed in order to pay bills before they are late, can advance payment loans actually do damage to your credit score?

Let’s take a look at how these loans work:

Advance payment loans are usually very short in duration. They can be for as little as a few days, although most are between seven and 21 days.

They also charge a very high rate of interest for such a short duration. Although some states limit the amount of interest that can be charged by advance loan centers, many do not.

Payday or advance payment loans are also usually structured in a way that the money is withdrawn from a valid checking or savings account automatically on the due date. In effect, these loans are like cashing a post-dated check, but it is all done electronically.