Payday Loans vs. Overdraft Fees
Posted on Thursday, August 5th, 2010 at 12:40 pm in Financial Planning, Helpful Payday Loan Info
Recent changes to Federal law regarding overdraft charges could make bank fees a hazard of the past as consumers turn to payday loans to protect their accounts from overdrafts. New regulations require banks to alert customers when a debit transaction will overdraw their account and provide them with the option to continue the transaction with a $35 overdraft fee or to simply decline the card.
Bank overdraft fees are a very expensive type of short term consumer credit, with annual percentage rates (APR) near 1,000%, even if you’ve only overdrawn your account by a couple of dollars. When an overdraft occurs, the bank fronts the cash to pay for the transaction and charges the customer a $30 fee for the borrowed money. The bank continues to charge $30 for each day the account is overdrawn, resulting in an APR of 750% for an account for 2 weeks by $100. The next time you make a deposit in your account – whether it’s a paycheck or a transfer from your savings account that you were planning to use for a special purchase – the bank uses it to pay the overdraft, leaving your account emptier than you anticipated. Most consumers who keep average track of their finances, checking their balance online on payday or waiting until their monthly statement comes in the mail to balance the checkbook, don’t even realize when they’re in danger of overdrawing their accounts and facing these unreasonable charges.
With this new legislation called Regulation E, requiring banks to alert customers at the ATM or cash register when a debit transaction will overdraw their account, consumers can turn to more cost-effective payday loans as an alternative to overdraft protection from the bank. Payday loans carry a much lower APR than bank overdraft fees, making them a more wallet-friendly short term credit solution for temporary cash flow troubles. Don’t let banks bully you with overdraft charges. When you’re alerted to a low account balance, apply for an instant approval payday loan and avoid bank fees altogether.
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