Recent Study Shows That More People are Using Payday Lenders such as PaydayLoanTrust, as Opposed to Overdraft Services

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As many in the payday loan industry already know, there has been a long time “battle” raging between big banks and short term lenders, also referred to as “payday” lenders such as Payday Loan Trust. It seems that big banks are very protective of their overdraft/NSF revenues, and quite understandably due to the fact that banks made over 38 billion dollars from overdraft fees in 2009 alone! Many consumers who are facing overdraft or NSF fees when they are short on cash between paychecks do not have many other options and end up turning to payday loans as a more affordable option. And a recent study from Moebs service shows that more people are turning to payday loans then to overdraft protection services.

As many in the payday loan industry already know, there has been a long time “battle” raging between big banks and short term lenders, also referred to as “payday” lenders such as Payday Loan Trust. It seems that big banks are very protective of their overdraft/NSF revenues, and quite understandably due to the fact that banks made over 38 billion dollars from overdraft fees in 2009 alone! Many consumers who are facing overdraft or NSF fees when they are short on cash between paychecks do not have many other options and end up turning to payday loans as a more affordable option. And a recent study from Moebs service shows that more people prefer their payday loan lender over their banks overdraft protection services.

Moebs Services, an economic research firm, has recently released a national study showing that more customers are turning to payday loans as an alternative to hefty overdraft fees. In fact, according to Moebs there are 19 million people using payday loans as opposed to 13 million who are frequently using overdraft services.

Many speculate that this is due to the fact that the average payday loan costs significantly less than the average overdraft fee. Based on the Moebs study findings the average overdraft fee is $27.01, and can be charged multiple times in the customer uses their debit card again after unknowingly overdrawing their account to a negative balance. In contrast, the average payday advance loan charge for a $100 loan will only cost $17.97, a full 33% less than an overdraft charge!

The study also goes as far as to outline the business opportunity for banks, if they were to lower overdraft fees to less than $20 dollars. But due to the arrival of Regulation E which effectively bans overdraft and NSF fees, we may never get to see banks lower their overdraft fees to a more acceptable figure. In fact, most fees generated from NSF’s will be simply moved elsewhere, such as new and higher check cashing fees and more. Also, many banks are no longer offering “free” checking accounts and will now charge a monthly fee to maintain an account with them.

In our current economic crisis, it is essential to keep credit options available to working families in their time of need. Payday loans can provide a much needed re-course when other credit sources are either un-available, or simply do not meet your current financial needs. After all, there is no reason to fix a short-term cash problem with a long-term loan, or vice versa.

We hope to see the payday lending business continue to operate responsibly to give working class Americans another option to overdraft fees, bounced checks or utility disconnect/reconnect fees in their time of need. And because payday lending is fully regulated by State laws, every single detail of the loan is disclosed to the customer at the time of the loan, giving them the proper information to make the best financial decision based on their needs. After all, making your own financial choices is part of your financial freedom!

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Al Sefati
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