“Evil” Fast Payday loans can be a quick, smart way to avoid huge bank fees in an emergency.
The Denver Post had a surprising article defending payday loans, that suggested we not be so fast to harshly judge those no credit check, no teletrack, instant payday loans you see advertised everywhere. There’s been for a few years now a growing mood of outrage towards payday loan lenders- they are considered slimy and evil, unlike good, respectable banks. They are even either illegal or impossible in 13 states (impossible due to laws imposing interest caps, which makes them unprofitable.) But in Terry Kibbe’s article yesterday (March 13, 2008), Without payday loans, some consumers pay more bank fees, she shows that fast emergency payday loans can help consumers actually AVOID huge and often crippling bank loan fees.
When payday loans disappeared in Georgia, consumers actually paid higher costs in overdraft bank charges and late fees. Economist Donald Morgan (Federal Reserve Bank of New York) noted that when payday lenders were forced to shut down in Georgia, it was the credit unions that reaped big profits. Morgan recently told Forbes Magazine that, “interest rates on overdrafts charged by credit unions and banks can exceed 2,000%, dwarfing the high interest rates on payday loans.”
I actually worked at a major bank for a while, and fielded calls all day from people begging me to reverse bank fees. This bank charged $35 for EACH overdrawn transaction, and each night would process the most expensive transaction first.  In other words, if someone made 5 $5 purchases with their bank debit card in the morning, and then that evening bought $200 in groceries, that totals $225. If they only had $204 in their bank account, their largest item would go thru, resulting in a $35 fee for EACH of those 5 $5 purchases in the morning. Plus one overdrawn fee of $30 for going overdrawn. This would result in the consumer having over $200 in fees for being $21 short! This isn’t just a hypothetical. I saw it every single day. And listened to these consumers begging me to reverse the charges. For many of them, taking the time to research and then choose a fast payday loan lender would have been a wiser choice.
And worse, many bank customers I spoke with had direct deposit into their bank account from their employess, where the moment their $800 Mcpaycheck was transferred to their account, the bank would take out $600 in late fees from the previous 2 weeks, leaving them with $200, practically ensuring the cycle would continue. All major banks have a black list, so that if someone tries to hop to another bank to break out of this downward spiral, they will be declined.
I was actually fired from this bank for being too much of a Robin Hood. Reversing too many late fees from tough cases of people who had very little hope.
Of course this spiral of late fees extends past bank charges and into credit cards etc. And since credit cards are essential these days for purchasing items where cash isn’t accepted (like airline tickets online, etc.) many of those with bad credit have a bad credit credit card, which often charge even higher interest, late fees, over limit fees because customers are potentially, according to their credit histories, a greater risk.
In light of that experience, I have to agree. Fast emergency payday loans- the kind so many of us feel angry about for taking advantage of people in financial difficulties- they actually can be the most intelligent alternative compared with the huge fees banks now charge. According to the payday loan article:
A separate report in the Norfolk, Virginia metro area revealed that the majority of payday borrowers are middle income, educated consumers who are using the bridge loans in a responsible way.
This was interesting to me because the people who called me- most of them had Mcjobs and might not have had the foresight to actually choose to get a quick payday loan instead of reap such outlandish banking fees.
So if you reach a point where you are going to have to face those huge bank fees, you might find a fast payday loan company online or in your town. Make sure they are reputable, and find out exactly what ALL the fees are and the exact terms of the loan. Make sure you understand it, and add it up. Then call your bank, or look online and make sure you understand ALL the fees they will charge. Compare and make the smartest decision. Payday loan lenders offer comparatively fast cash advance loans with no credit check, no teletrack and no telecheck. Depending on the day and time you apply for a cash advance , your payday loan can appear in your bank account the next business day. All that means is it is often quick and easy for you to apply for and then receive a short term high interest personal loan if you can show evidence you have a steady job. But paying BACK the loan isn’t always so quick and easy. So make sure you have a real plan to do that, and a longer term plan to avoid these situations in the future. No matter which way you go, the fees DO add up. There are many sites that have some trustworthy consumer info on payday loans and other consumer loan info,  including Smart Money Daily Payday Loans for the U.S.
What all the experts point to is 1. read the fine print on the cash advance loan, making sure you understand what you are agreeing to, and 2. make sure you have a definite plan to pay back the payday loan, to prevent a spiralling cycle of increased debt.
Page topic: Judging payday loan lenders? Not so fast: Payday loans can be a wiser alternative than terrible bank fees, in spite of the growing outrage and increased laws towards payday cash advance companies.
