A Closer Look at Pay Day Loans vs. Bank Overdraft Fees

According to the Los Angeles news "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 Los Angeles News 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 American Cash Market: payday loan will save you quite a bit of your hard earned cash over just a 10-day period.

Payday loans in California are basically short term loans provided by lending institutional to customers. It is also referred in Los Angeles as cash advance because it is cash provided. American Cash Market assists borrowers in California in handling their expenses until next payday. The purpose of payday loans is to avoid expensive bounced- check fees and late penalties, and bridge the borrowers cash flow gap between payday.
California loan term is 10-14 days. American Cash Market Los Angeles stores successfully operating in California for more than eight years and offer online and offline payday loans as well as other financial services (checks cashed, money orders, bills pay and Western Union money transfer). The single greatest advantage of California payday advance loan is that it is possible to get payday loan approved even if borrowers have a bad or poor credit record. The procedure of obtaining California payday advance is very simple and come in the form of small, unsecured loan which means the is no collateral required. The loan amount approved would mostly depend on income. The American Cash Market will evaluate the amount customers can comfortably pay on the next payday. In most cases borrowers would get money deposited to their checking account next day or they can pick up cash in our Los Angeles branches 7 days a week.

More news:

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The Hidden Fee in Credit Card Cash Advances

The Benefits of the No Credit Check Policy of Payday Loans