Comments on: What Costs More–A Bounced Check, Credit Card Late Payment Penalty or Payday Loan

By: helene krause

helene krause — Tue, 12 Jan 2010 15:40:11 +0000

does a bounced check affect your credit rating???

By: michael roman lach

michael roman lach — Sun, 20 Sep 2009 18:45:07 +0000

Removing lates can be a big pain! I have sent lots of letters to the credit bureaus, the collectors, credit card companies, etc. Eventually I just hired a reputable non-profit based on a friends reference. RemoveMyCreditInquiries.ORG was their website. They removed hard inquiries, 30 day lates, 60 day lates and 90 day lates. I am not sure if they do anything else. They charged me only $15 as well.

By: DR

DR — Fri, 08 May 2009 21:30:34 +0000

TheGooch, good point. Although overdraft protection is getting more and more expensive. At Citibank, they charge you a $10 fee PLUS double-digit interest.

By: TheGooch

TheGooch — Fri, 08 May 2009 13:02:11 +0000

Um., what about overdraft protection? Or isn’t that a factor?

By: John

John — Thu, 05 Feb 2009 16:42:25 +0000

Another thing to consider:

If you have not previously had a late fee on the checking account or credit card in question, or if the last late fee you had was more than a year ago, many banks and credit card companies will waive the late fee as a courtesy on an one-time-only good-customer-relations basis.

Granted, they probably won’t do it more than once, but if you are faced with the situation described in the set up, and your history is clean, you could at least consider taking the hit on the late fee with at least the hope of having it waived.

Just a thought . . . . .

By: DR

DR — Wed, 28 Jan 2009 15:36:37 +0000

Chris, the comparison between payday loans and renting a car or staying in a hotel is excellent. It really makes no sense to annualize the cost of a 7 day loan. By that measure, just about any late fee (whether for a credit card payment, mortgage, rent, etc.) would cost well over 1,000% on an annual basis.

By: Chris

Chris — Tue, 27 Jan 2009 22:53:19 +0000

Gene,

I am guessing that what you saw was a contract for an installment loan and not a payday loan. Typically, a payday loan has a set fee for the period of the advance and the only additional fees would be a late fee and/or NSF if run thru the bank. To fixate on the APR is incorrect due to the short period of the loan. The APR analogy is similar to the cost involed with renting a car. You pay an amount for the loan for a short period of time, not over a year. If you rent a car for a day, it is a set fee. You are not paying that fee daily for the entire year, just for the short period. This is the same excercise that can be used for hotels, apartments and anything else that is borrowed or rented for a short period.

The industry “preys” on no one and is available to anyone that has an open, active checking account and verifiable income. The last thing that any financial business wants to do is to put someone in a position that they cannot repay. This is foolish and as a businessman, you should know that it is the path to certain failure.

By: DR

DR — Tue, 27 Jan 2009 19:27:22 +0000

Gene, I think you and I agree on this one. If you can’t payback ANY loan, including a payday loan, don’t take the money. That said, statistics on payday loans may surprise you. To get a payday loan, you must employed and have a checking account. The average income of a payday loan recipient is over $50,000 a year. I should add that another option would be cash advance from another credit card. Not a cheap alternative either, but fees generally run less than a payday loan.

By: Gene

Gene — Tue, 27 Jan 2009 18:28:55 +0000

DR,

If you can pay it back – great. However, the people who are most likely to take out loans seem to be the least likely/able to pay it back.

The penalties for not paying back a payday loan are EXORBITANT. They are significantly worse than a late fee and a tiny hit to your credit. In many states, the payday loan companies force you to sign a wage assignment in order to get the loan. Thus, they can legally garnish your paycheck! That $100 at 500% APR quickly grows.

Your loan becomes a monster that can never be satisfied.

By: DR

DR — Tue, 27 Jan 2009 00:31:57 +0000

Gene, why not get the payday loan and pay it on time? Wouldn’t that be cheaper than paying late fees AND taking a hit to your credit?