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Payday Loans. . .Good or Evil?

Jolene Phipps — Wed, 16 Nov 2011 14:39:49 +0000

When you hear the words “Payday Loan” what comes to your mind?

Do you think of an industry out there taking advantage of consumers?
Or, do you think about an industry providing people with relief and peace of mind during this financial crisis?

Most people would say answer a. But is that true or do we need to educate ourselves regarding this part of the financial industry? Who are the people that need these payday loans and do they have other options?

According to www.census.gov the official poverty rate in 2010 was 15.1 percent, which was up from 14.3 percent in 2009. In 2010, 46.2 million people were in poverty, which was up from 43.6 million in 2009.

Those are staggering numbers. People are having a hard time making ends meet. From 2009 to 2010 an additional 2.6 million people were at poverty level. Where did they come from? Middle Class families? Low Income families? Who is out there helping them get back on their feet? The banks? With the foreclosures on homes, the increased account fees, overdraft fees and high credit guidelines… what do you think?

What sort of monthly expenses do all of us face? Rent/Mortgage, utility bills, insurance, car payment, food allowance just to name a few. If you are running out of money at the end of the month what would you sacrifice? Your electric bill? Your rent? Your car loan? Or just overdraft your bank account? All of those choices involve late fees or overdraft fees and may incur being harassed by credit agencies or having your electricity turned off, being kicked out of your home or having your vehicle repossessed. None of those sound like viable solutions to me.

According to www.wikipedia.org the definition for a payday loan is “a small, short-term loan that is intended to cover a borrower’s expenses until his or her next payday.” That is truly what a payday loan is there for. Many times you will hear payday opponents talk about high interest fees, but when you research these fees in comparison to bank charges and late fees of missing necessary payments and/or possible repossessions/foreclosures/losing electricity, going hungry etc. – which sounds better to you?

So before we judge the financial institutions giving payday loans or the people receiving such loans – let’s make sure that we look at the situation from all angles, and form an educated decision.

Do Consumers Really Need A Checking Account?

Mari Woods Holt — Wed, 02 Mar 2011 21:59:40 +0000

There are many out there that are considered the “unbanked” consumer, and I wonder if it is because they choose to be that way or they are not able to obtain a bank account? However, is there a scenario where more people should become “unbanked” because the cost of having a traditional checking account for instance is a lot higher than other alternatives? Some say that the better alternative for those that carry very low balances on their checking account is to have a pre paid credit card. This often times works just like a checking account, however the fees related to this type of account are far less than maintaining a checking account. Reuters.com reports that the average person who has to maintain a checking account pays between $218 and $314 a year, whereas a person with a pre paid credit card is paying between $76 and $261. For someone that is maintaining such a small balance that amount of difference is a BIG deal.
Bottom line- traditional banks are not your only option with regards to paying your bills and maintaining your money. Look at online banks and other options like pre paid credit cards and compare the fees they charge to maintain your own money.

Banks Offering Personal Loans Again?

Natasha Aronov — Mon, 15 Nov 2010 14:51:20 +0000

The downturn of the economy has left many people with high credit card balances and not many options. Payday loans have been and will continue to be a great source of necessary and quickly needed funds for a large number of consumers however don’t always offer the larger amount loans or longer payment terms that personal loans once offered. Prior to the economy taking a downward turn and home-equity loans becoming the popular choice personal loans were the main option for many people.

Recently, as the demand to borrow money has become necessary for many, personal loans have been in demand and the supply is starting to make a comeback. Personal loans, can offer the longer terms and higher borrowing amounts than payday is typically able to and offers a much better option and interest rate than credit cards do.

Recently, according to CBS MoneyWatch, banks including Wells Fargo, Discover Financial, Citi and CapitalOne are all currently offering personal loans.

Wells Fargo – loaning $3,000 – $10,000 for lengths as long as five years
Citi – $300 – $7.500
Discover Financial – lending up to $25,000

The Next Possible Big Thing In Loans?

Natasha Aronov — Fri, 22 Oct 2010 02:41:29 +0000

The number of underbanked consumers having little to no ability to obtain credit or utilize the services of a conventional bank is currently 60 million and growing. Companies have been emerging to help these consumers, with the newest of which being ZestCash. Douglas Merrill, the former Google CIO and VP of engineering launched the new ZestCash product hoping to serve and attract the underbanked and aim to legitimize the payday loan industry.

The traditional payday loan is between $100 – $1,500 and paid back on the consumers next two pay dates, offering at times an extension for an added fee. ZestCash differs from these loans by allowing the loan amount and length to be chosen by the consumer. The consumer is shown the amount of the loan chosen broken down by weekly payments (which are auto debited from the customers bank account) prior to the loan being given.

Currently, ZestCash has a $500 borrowing limit only operating online without any brick and mortar locations.

BOFA to Test Tiered Account Fees

Christina — Mon, 20 Sep 2010 21:56:33 +0000

As if banks and credit card companies aren’t charging enough these days Bank of America has decided to test new pricing models . BOFA expects to lose $4.3 billion in revenue as a result of the new federal restrictions on bank and credit cards.

How do they plan on recovering some of this loss? By charging its customers for not using their cards of course. Customers who do not use their cards a certain number of time a month, conduct all their banking electronically or do not maintain a minimum current balance will be charged more then other customers. For example, customers who want paper statements will be charge $8.95 per month.

It will be interesting over the next few months to see the estimated ½ dozen new pricing packages BOFA will roll out and which ones will remain permanent.

Paying To Not Use Your Credit Card?

Natasha Aronov — Wed, 02 Dec 2009 03:59:07 +0000

This past June many card companies such as First Third Bank decided they are now charging their customers $19.00 for not using their credit card. They added this fee to help increase their revenue, and a way to “encourage” their customers to use and manage their credit card accounts. With the amount of credit card debt and late payments, is this the only option of increasing revenue? Probably not. A lot of credit card companies such as Amex and Discover will simply send you a notice that your account will be closed if you do not start using the card. This seems much more reasonable than charging your customers for inactivity.
Climbing your way out of debt is hard enough, but fixing your credit score can be even more challenging. When an individual finally pays off their credit card, the first reaction might be to close the card so you do not get yourself into that situation again. However, depending on your debt to credit ratio it can actually lower your credit even more. So what is the best to do? Close your account and potentially lower your credit or leave the account open but get a fee for non use? This really puts people in a pickle.
One option for the consumer is to charge only one or two small items on the card a month. This will keep the card active without getting a fee or affecting your credit in a negative way. If you are one of the many that are in debt, debt consolidation/settlement maybe something worth looking into. Everyday at LeadPile, we match lenders with consumers to try and help with their debt needs, but each person needs to know the basics about their own credit/creditors. Knowledge is power!

Capitol One Buys Chevy Chase Bank

Mari Woods Holt — Fri, 05 Dec 2008 14:52:49 +0000

In the midst of banks going under and consumers struggling to survive, another bank transaction has happened. According to consumer affairs, Capitol One has purchased Chevy Chase Bank. Chevy Chase bank has a large presence in New York, New Jersey, Texas and Louisiana.

I think the oddest thing about another bank merger happening is, that I am not sure how many more of these mergers can really happen? What other banks are out there anymore? Also, I am not sure about your area of the country, but there are other “new” bank branches showing up on intersections all over my city. I thought banks had no money? How are they building all these new locations around our towns? Maybe Leadpile Lead Exchange should start generating leads of businesses wanting to open a new bank…. no I don’t think so.

On a serious note, it is just a little odd to me to have so many banks either going down or being purchased, to then see new banks opening up in our cities. Are they going to be able to lend to all these consumers who are not qualifying at these other “struggling” banks? I hope so because people need help right now!

Update: Wachovia Bank Takeover

Mari Woods Holt — Fri, 03 Oct 2008 22:51:20 +0000

I have an update on an earlier post discussing Citigroup taking over the failed Wachovia Bank. However, there is a new twist in this situation. A announcement was now made stating Wells Fargo & Company has purchased Wachovia Bank for a $15.1 billion all stock deal! Citigroup had agreed previously to purchase Wachovia for $2.1 billion, in addition to receiving some government assistance with the transaction. According to Business Week, the shareholders and regulators are now going to have to decide the future of the bank. It appears that the Wells Fargo deal will least likely affect taxpayers, and this could be more attractive to those that will be ultimately be making the decision on the future of Wachovia Bank. We shall all see how it works out……..