It may seem easy and convenient to use check cashing stores and payday loans near you, however the costs involved can add up quickly, and soon can make life very difficult for you. See what’s really involved with check cashing and payday loans and consider your alternatives.
- Charge high fees— up to 5 percent of the check amount for example it would cost you 12.50 to cash a $250 check; and usually it costs $3 for a money order. Average fees for users are more than $800 a year!
- Are not open all the time (like ATMs).
- Usually can only offer cash (and not a debit card). Cash isn’t as safe as a card and there’s very little you can do if your money is stolen or lost.
Pay day loans are usually made to people who are desperate, need money right away, and plan to pay it back with their next paycheck. Lenders usually offer amounts up to $500 for short periods of time such as one to four weeks.
Loan fees range between $15 and $70
, depending on the loan amount. If you don’t pay off the loan within the agreed amount of time, the lender renews the loan and adds on late fees
. Over 90% of payday borrowers end up paying more than the initial fees. The Center for Responsible Lending
found that the average payday borrower ends up paying over $700 for a $325 loan!
Also, payday loans aren’t considered real loans, so no matter when you pay them off, they don’t help you build a credit history. Without a credit history it is difficult to get a loan from a bank, get a credit card, or buy a car.
If you see an item that’s on sale and you think it’s a great deal, but you need a payday loan to pay for it you might be better off saving up for it over time
, or looking for a similar but less expensive item on Craigslist