Chicago, IL (Vocus) September 15, 2009 -–
Big banks, such as Minneapolis-based U.S. Bancorp, Wells Fargo & Co. of San Francisco, and Fifth Third Bancorp of Cincinnati, are now beginning to market payday cash advance loans to their checking account customers. According to PaydayAdvance.org, an online payday advance website, the decision by these banks is viewed as positive and negative by easy payday advance lenders.
Many easy payday advance lenders feel this move by big banks may have a positive impact on the industry because it will take them out of the fringe and into the mainstream. They could be seen by the general public as more legitimate and may ease legislative initiative against them.
On the other hand, some online payday advance lenders believe the big banks new marketing idea could cut into their profits by taking away a chunk of their customers. The big bank lenders would still charge triple-digit interest rates to their checking account customers but these rates would still be cheaper than the payday advance lenders rates.
The three banks charge about $10 per $100 borrowed, which equates to about 120 percent annual interest rate if the borrower pays off the loan in one month. This is lower than the average $17 per $100 borrowed from traditional payday advance lenders, which is about a 200 percent annual percentage rate.
As the recession continues on, some believe it is the right time for big banks to offer loans with less stringent application processes. The recession has prompted many credit card issuers to cut limits, hike up rates and fees, or eliminate lines of credit altogether. These moves had made traditional credit less affordable and payday advance lenders more attractive.
The new competition could also add competition to the market, lowering rates and fees of payday loans. In addition, by making the source more mainstream, regulation could be tightened.
PaydayAdvance.org is a free service that connects people looking for short-term loans to lenders. To learn more, please contact us by visiting our website.