Payday Loans Are a Better Deal for Consumers Than Overdraft Fees
From: "Payday Loans Are a Better Deal for Consumers Than Overdraft Fees", Payment News, Staff Writer, 7/13/2010
Consumers who are frequent users of overdraft (OD) fees at banks and credit unions could save money by bridging their cash gap with a 14- day payday advance loan, rather than paying checking account OD fees, according to a recent national study by Moebs Services.
“The average amount overdrawn on checking accounts by about 70% of consumers, according to the General Accounting Office and the FDIC, is less than $100,” said Michael Moebs, economist and CEO of Moebs $ervices. “Consumers who use a payday advance loan for $100 or less will pay an average of $17.97, which is 33 percent less than the $27.01 it costs for an overdraft of that same amount from a checking account,” he explained.
“Based on these study findings, we believe that banks and credit unions should consider reducing their OD fees to less than $20,” said Moebs. “Because 90 percent of a bank or credit union’s revenue comes from OD fees, they could increase their revenue and their volume by lowering OD fees. This would enable them to maintain their revenues at the 2009 level.”
According to Moebs, there are 19 million consumers who use payday lenders, compared to 13 million consumers who frequently use overdrafts.
“Since a checking account is required to qualify for a payday loan, banks and credit unions already have these consumers as customers or members,” explained Moebs. “If banks and credit unions lowered their overdraft fees and reached out to consumers who are frequent users of payday loans, more consumers would opt to use the overdraft services of their financial institution. This would secure future brand loyalty, and be a good source of additional revenue,” said Moebs.
Written By: rnybeck
Date Posted: 8/31/2010
Number of Views: 2522