Are payday loans cheaper than credit card or overdraft fees?
When some people hear the terms Payday Loan or Cash Advance the first thoughts that come to their mind may be that they are a scam, rip off, or some other negative term gets thrown around about the payday loan industry.
But if we take a closer look at how payday lending works compared to some other forms of borrowing money before payday we will see that the other forms of lending may be the real money eaters.
What are some common forms of lending that payday loans can replace?
Many people who still have fair to great credit rely on credit cards to carry them to their next paycheck. Using their cards to pay bills, buy groceries, or handle unexpected payments such as medical bills. Credit cards are a very useful tool in today’s world, but are they really the best option for borrowing funds? Let’s look at the numbers to see.
There are quite a few different ways you can be charged for using your credit card.
Purchase APR – This is the percentage rate charged for the balance all purchases or payments made with your card that has not been paid within 30 days. The average APR is between 17%-23%
Penalty APR– This is the percentage rate charged if you fail to make a minimum payment within 60 days of its due date. These rates are usually in the 30% range.
Cash advance APR/fees– Most credit cards also charge you to withdraw cash from an ATM. Rates for cash withdrawals usually range from 3%-5% of the amount withdrawn with a minimum of $10 fee. Cash withdrawals start accumulating interest instantly, there is no grace period.
As you can see, using a credit card to cover expenses can cause interest fees to quickly accumulate.
Getting a payday advance is a great way to avoid nasty overdraft fees from your bank. We have almost all dealt with an overdraft fee once or more in our lives. When the people we trust to hold our money charge us $35 for our accounts going below $0, therefore making our account even more negative. And on top of that they hit you with extended overdraft fees usually around $15 if your account has been negative for a little over a week. These fees can be applied for a charge as little as $9. Yes that is correct, $50 in fees for a $9 loan, that’s a 555.56% fee. Thanks a lot bank. Not to mention there is no way to work out a payment plan with the bank, once your money is deposited whatever you owe them it theirs.
Choosing a payday loan instead-
So how do payday loan rates compare to using a credit card (if you have fair enough credit) or overdraft fees?
The reason payday loans get a bad rap is because of their high APR or annual percentage rates. But the thing is that the term of a payday loan is only 7-30 days. If you take out a $100 loan your fees are only going to end up being about $15 in fees for that loan. Which as we now know is definitely a better deal than the bank or credit card companies are offering.
The two keys to successfully borrowing with payday loans are:
- Only borrow what you need, just because you can get a $500 loan does not mean that is what you should go for if you just need to get groceries for the week.
- Pay your loan back on time. Preferably with the paycheck directly after you receive your loan. This will prevent putting off payments and accumulating interest.
So now when somebody asks “Are payday loans cheaper than credit cards or overdraft fees?” you can say “Yes, as a matter of fact they are.”
So if you need some cash, just click below to apply now!Get Cash Now!