Should I get a payday loan to cover my overdraft? Here lies the dilemma about covering your overdrafts by taking out a payday loan. It would appear that by taking out a payday loan to cover your overdraft is like borrowing from Peter to pay Paul. On the contrary, unlike years past when you had an overdraft you were allowed to wait till you could make a deposit to cover it. Those days are over, some banks will charge as much as $12 per day for each overdraft item per day, depending on your banking institution. Each bank has its own set of rules, ask your bank for their Deposit Agreement. Payday loans are expensive you’ll pay between $15 to $25 for every $100 you borrow. Evaluate your situation carefully and ask yourself the following questions;
- When will your next paycheck arrive?
- Have you checked the overdraft policy at your financial institution?
- Will your bank costs out weight the cost of a payday loan?
- Have you explained your situation to your bank manager?
- Can I get a short-term loan from family or a friend?
- Will my employer give me an advance on my paycheck?
Payday Loans Versus Bank Overdrafts
What if I have checks and debits coming into my bank account and I don’t have the money to cover them? Rather than incurring a nonsufficient fund (NSF) fees a payday loan could be the right choice but only after you have exhausted all other efforts to find the fast cash you need. Be mindful that each check or debit that comes into your account will be charged a $35 NSF fee that includes a $3 cup of coffee. In comparison, two NSF charges are $70 a $200 payday loan would cost $50 at the most. With a payday loan, you would have a short time to pay the loan back. In other words, carefully evaluate your options.
Banks Are Cleaning Up On Overdrafts
According to CNN Money the big top three banks BofA, JP Morgan Chase, and Wells Fargo rack up 6.4 billion in ATM and NSF fees from consumers. Furthermore, Chase made close to 2 billion dollars in bad check fees, Bank of America $1.8 billion and Wells Fargo $1.7 billion. Either way, it’s up to the consumer to know what’s coming out of our account. It would be easy to blame the banks. Many of us try and roll the dice hoping those transactions don’t come in before your next direct deposit. With the latest technologies banks, processing times is very fast. Those days of floating a check just don’t exist any longer.
Payday Loans You know What You’re Getting
With a payday loan, you know exactly what you’re getting. A high-interest loan to meet a short-term cash emergency. On the positive side payday loans can get you back on track before bank fees start adding up. On the downside, you don’t want to get stuck in a payday loan cycle of continued use. Payday installment loans may be a better fit giving you more flexibility. Installment loans will allow the borrower to make payments. Both payday and installment loans have high interest and are meant for short-term use only.