Payday Loans Sometimes Better Than Checking Account Overdraft

If money is tight, the best thing to do is make more money. But often times that is easier said than done. Let's say you need some groceries. You head over to your Neighborhood Market or whatever is in your area. You grab some food, stuff it into your cart and go to the registrar. Tip, tip tip... bingo: This is $25.76. You reach for your wallet, take your ATM card and pay. Everything looks fine.

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Next day you happen to log in to your bank account and OMG... it says minus $32. You thought you still had some cash in there. What the heck happened? Then you realize that the last trip to your grocery store was more than the bank account could bear. You thought that there were about 40 bucks left, but you forgot that you were charged late fees when you paid the utilities last week. Somehow your math was off.

Ok, you got over that. You will put it in with the next paycheck. On Thursday you log in to your account again and you almost drop dead: Instead of the expected $32 minus, it now reads minus $92!!! How could that happen? Well your nice bank charged you $7 for every day that your balance was in minus.

Based on the original $32 that equals an interest rate of over 20% per day! That is not nice, to say the least. That is worse than a loan shark.

So, in this scenario, it might have been better to get a short term loan or payday loan. Yes, they are expensive. Yes, there are risks involved. The main risk being that you get the loan and think that everything is now handled and then you get hocked on the payday loan and you find yourself in a vicious cycle that is difficult to break out of.

But, if you use a payday loan wisely to get fast cash to get out of a difficult situation and make sure that you pay everything back as soon as possible, it might be better than paying all those overdraft fees. Especially as the banks do not let you overdraw the bank account for ever. Depending on the bank, you might find yourself without a bank account if you do not put the account back into the black within two weeks.