A Closer Look at Payday Loans vs. Bank Penalties & Overdraft Fees

According to the Guardian "many banks are encouraging clients to overdraw their chequing accounts, allowing the banks to avoid credit laws and collect millions in new fees." Also, "the rapid spread of the programs has turned overdrafts and overdraft fees, into one of the largest sources of profit for banks" You might now realize that payday loans are actually much more economical than paying costly overdraft fees to your bank.

Some banks say that authorized overdrafts, which protect customer from unnecessary fines and bounced-cheques and allow customer to overdraw money from their accounts, are a service to customers. Nevertheless, these "authorized" overdrafts could be a bad deal for customers

Unlike typical forms of borrowing, which charge a typical annual interest of up to 16 percent, overdrafts charge fixed fees for every transaction going over the limit. An overdraft fine can be as high as £30 per single transaction, translating into extremely high APR%. Once you go over your authorized limit you are required to bring your balance back into positive terms in a matter of a few days. After this overdraft is used up, the banks again start bouncing your cheques and unnecessary charge high fees.

Industry experts maintain that authorized overdrafts are really high-interest loans for the employed. Unlike flat fee payday loans, which are regulated and controlled, bank overdrafts work in an automatic manner with your debit card and cheques. Most customers don't even know they have withdrawn their limits until they are notified by the bank, but that's already too late as the charge has already taken place. According to these analysts, banks may exploit this situation and only notify their customers after they have overdrawn their limits.

On top of that, Banks tend to ensure that your largest "most important" cheques and expenses are processed first. So in effect, your account will become negative very fast and all the smaller expenses will incur the penalty fees. Factor in the average bank penalty of £20 per bounced-cheque, and five overdraft items for £200 could add up to almost £300 including charges! By contrast, pay day loans for £200 would incur fees of only £45-£60.

If you take a look at your current bank fees for overdraft and bounced-cheques, you may positively realize that getting a payday advance can be very beneficial. It's like fooling your bank and beating them on their own game...

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