Payday Loans vs. Overdrafts
Why would anyone choose payday loans when most banks now offer overdraft protection for checking accounts? How can a payday loan be a responsible choice when your bank can just "take care of it" for you? Overdraft protection sounds like a great service your bank covers the difference when you come up a little short but this service can often come at a big price. Instead of one flat, upfront fee that comes with taking out a payday loan for fast cash flow problems, overdraft protection fees can quickly spiral out of control, leaving you more debt and leading to even more overdraft charges. You'll find a clear explanation of how overdrafts and overdraft protection typically works, and why getting a payday loan can often be a better alternative.
When you make a payment, withdraw funds, or write a check for an amount that is more money than you currently have in your account, your account then becomes overdrawn. When you are overdrawn, your bank has the option of then covering the missing funds so you don't "bounce" a check or debit card purchase. Usually your bank includes this service, called overdraft protection, as part of the checking account you choose, so make sure you're aware if this is currently a feature of your account.
If you have overdraft protection as a feature of your account and your bank then covers the difference between what you have in your account and the amount you need to cover the check, debit or cash withdrawn from an ATM, your bank will typically charge an overdraft fee. Overdraft fees are often upwards of $35 regardless of the amount of the purchase or cash withdraw your bank covers. Neglect to check your balance for even small purchases and you could be paying multiple overdraft fees, even if your account was initially less than $1 overdrawn. These overdraft fees can add up quickly, leaving you in over your head fast.
If the bank opts not to pay your difference because you don't have overdraft protection as part of your account, you may be charged a bounced check, or NSF (non-sufficient funds) fee. The person or business trying to submit your payment may also charge you a returned check fee.
What's the best way to avoid overdrafts and all the costs that come with them? Keep organized, balanced bank accounts. If you're not sure what your balance is or, if you have an outstanding charge that hasn't yet processed and want to know if it has, most banks will provide you a toll-free automated number to call and check the available, useable balance of your checking account. Many banks also make online banking available so you can check you current balance at any time.
A payday loan can be used to avoid overdrafts by providing you with the fast cash you need to stay on track. And because your fee is significantly smaller than an overdraft or NSF fee and only occurs once in the duration of your loan, you know exactly what to expect. This makes it much easier to plan so you can avoid more overdrafts in the future.
Check 'n Go payday loans can help you avoid future bank overdrafts.