CATEGORIES Auto & Trucks Business & Finance Computers & Internet Education Environment and Going Green Family Food & Drink Gadgets and Gizmos Health Hobbies Home Improvement Humor Kids & Teens Legal Marketing Men Music and Movies Online Business Parenting Pets and Animals Politics and Government Recreation & Sports Relationships Religion and Faith Self Improvement Site Promotion Travel & Leisure Web Development Women Writing Keyword Search Article Title Author's Name SITE MENU Search Submit An Article Submit Articles in Bulk Submit Press Release Syndicate Articles Distribute Articles Privacy Policy Terms of Use Link To Us Contact Us Site Map Home

A Closer Look at Pay Day Loans vs. Bank Overdraft Fees  by: Alan Luong According to the New York Times “many national banks are encouraging clients with low balances to overdraw their checking accounts, allowing the banks to avoid credit laws and collect billions of dollars in new fees.” You might now realize that pay day loans are actually much more economical than overdraft fees from your bank. The banks say that the overdraft programs, which cover bounced checks and allow people to overdraw their accounts, are a service to their clients. But these overdraft programs are certainly a bad deal for consumers. Unlike typical lines of credit, which charge annual interest of up to 20 percent, the new overdraft plans charge flat fees for every processed overdraft, translating into an annual interest rate of over 1,000 percent. Unlike lines of revolving credit, which allow customers to repay the loans at their convenience, these plans require clients to bring accounts back into positive balance in only a few days. While most traditional lines of credit have limits of thousands of dollars, the new overdraft plans have limits of $100 to $300. After the overdraft is expended the banks again start bouncing checks. The New York Times also states that “the rapid spread of the programs has turned overdrafts, and the fees that come with them, into one of the largest sources of profit for banks, according to consultants and statistics compiled by government bank regulators. Washington Mutual, the nation's seventh-largest financial institution and the largest to promote overdraft protection, charged customers more than an estimated $1 billion in overdraft fees last year.” Industry analysts claim the overdraft plans, which contain fees as high as $35 per overdraft, are really high-interest loans targeted at working-class customers. Unlike pay day loans, which charge only a regulated flat fee for providing direct cash, bank overdraft programs work automatically with checks and debit cards. Customers often don’t even realize they have overdrawn their checking and savings accounts until they are notified by from the bank. "Some banks are looking at the fact that some consumers barely make it from pay day to pay day and have a very low balance, and instead of offering them a beneficial service, they are charging their customers bounced-check fees to take advantage of the situation," said Jean Ann Fox, director of consumer protection for the Consumer Federation of America. A recent study by the Federal Reserve last year found that banks have increased raised their overdraft fees 24 percent from 1997 to 2001, to an average of $20.42. That’s an average of $20.42 for each individual overdraft item! And it gets worse. Banks have sophisticated software programs that ensure that your largest checks and debits are processed first. This means that, if your account if going to go negative and overdraft is required, that a higher number of smaller transactions will each incur the overdraft fees. Add in the average merchant penalty of $15 per returned check, and five overdraft items for $200 could add up to almost $375 including charges! By contrast, pay day loans for $200 would incur fees of only $45-$60. When you’re caught short between your paychecks, take a closer look before using your bank’s overdraft protection programs. It’s very likely that you’ll find pay day loans from Personal Cash Advance: payday loan will save you quite a bit of your hard earned cash over just a 10-day period About The Author Alan Luong is the site owner of http://www.dezeinfo.com, which is a loan site that provides you information on payday loan such as how to get started, where to apply, and how to avoid online loan scam. webmaster@dezeinfo.com This article was posted on February 15, 2006   Read More Articles from the "Business and Finance" Category: Make Your Mark with Low Cost Home Improvement Loans by Bonnie Castle Top Ten List of Eligible VA Loan Purposes by Bruce Charles Revealed - Million Dollar Forex Investing Mistakes by David Jenyns Work at Home Business Ideas by J. Stephen Pope Identification Cards in Today';s Economy and Why by Allen Richardson Billing Solutions: Is Outsourcing Your Invoice Processing Service A Good Thing? by Clint Waite Advanced Hosting for the Mission Critical Web Presence by Vincent Bezzina Head And Shoulders, Double Tops And Bottoms, Triple Tops And Bottoms by Action Forex Coming to a Business Like Yours: Webware by Alan N. Canton Should I Pay Points? by Max Hunter << Back to "Business And Finance" Index

Disclaimer: The information presented and opinions expressed herein are those of the authors
and do not necessarily represent the views of ArticleCity.com and/or its partners.