Payday Loans are a cheaper alternative than bank NSF charges.  Payday loans are not for everyone and often get scrutinized morer severly than other forms of consumer alternatives.  Fees that are generated by banks, utility companies, credit card companies, etc. do not have to be reported as an APR; unlike payday loans.  Consumer advocates try to target Payday Lenders as a debt trap and never ending cycle of living in poverty.  However, when you look at the facts and realize that payday loans are a cheaper alternative, you have to wonder if the playing field is viewed fairly.

Cost of Payday Loans versus Customer Alternatives

• $100 payday loan with $20 Fee = 521.43% APR
• $100 bounced check with $48 NSF/merchant fees = 1,251% APR
• $100 credit card balance with $26 late fee = 678% APR
• $100 utility bill with $50 late/reconnect fee = 1,304% APR

Payday loans are a cheaper source of liquidity for customers who need it.  This in combination with convenience and enhanced customer service when compared to a traditional bank, will continue to drive customer demand for payday loans.

Source:  Community Financial Service Association and JMP Securities