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by sitecore\jhorton on September 12, 2012

Money in the drain

Families without bank accounts are on the rise, according to a survey by the Federal Deposit Insurance Corporation (FDIC). The agency reported that one-quarter of households in the U.S. lack a checking or savings account.

Unfortunately, many of these consumers are turning to high-interest alternatives, such as pay-day loans, title loans and pawn shops, to satisfy their banking needs. And while these may be convenient options – the cost of convenience is staggering.

According to Consumers Union, the fees for payday loans can be as much as $17.50 for every $100 borrowed. But it’s the interest rates that are downright dirty!

For example, the interest rate for a one-week loan is more than 900 percent. You read that right – nine hundred percent. And if you’re interested in a two-week loan, you’ll have to pony up 456 percent.

The payday industry justifies its business by stressing that they are only used for the occasional emergency. However, that’s rarely the case.

It’s reported that nearly seven in 10 people who use payday loans, rely on them for recurring expenses, such as food, rent, utilities and car payments. In fact, the Wall Street Journal reports that the average customer of a payday lender makes 11 transactions a year. And one can only imagine how quickly the interest on that many transactions could snowball.

So in reality, payday loans actually create more problems than they solve. And who needs more problems?

So rather than resorting to a payday loan, consider opening up a checking or savings account at an FDIC-insured bank or credit union. These financial institutions are beginning to offer more options for small loans, which would be the ideal alternative to using a payday lender.

Plus, opening up an account at a reputable institution will allow you to build an emergency savings account – which should be easy to do, now that you’re not paying triple-digit interest rates.

You should aim to save at least an amount equal to three months of your salary – ideally it should be six months. And depending on the financial institution you choose, your savings will earn interest over time – so your money will be making its own money! It’s a win-win.

Finally, remember that when facing a debt crisis, there is no “quick fix” that’s going to solve all of your financial issues. So anyone promising one should be scrutinized thoroughly.

And if you need assistance putting together a long-term solution to pay down debt, seek out a nonprofit organization, such as MMI, to get you on the right path toward a stress-free financial future!


Anthony Gartman says:
September 13, 2012

Unfortunately most of these people that are resorting to payday loans, check cashing stores and pawn shops are restricted from opening up a new bank account because they have been reported to ChexSystems. In reality more and more families are damaging their relationship with their bank(s) due to frequent overdrafts and NSF activity. It's unfortunate, but as the unemployment rate continues to rise and more and more people are either unemployed or have taken lower paying jobs or part time jobs, these people are stretching their finances so thin that they end up damaging their bank accounts and the bank(s) subsequently end up closing their account(s). Once an individual is reported to ChexSystems their financial life becomes even more complicated. If you refer to our website, click on Proven ChexSystems Results you will see actually client cases read their stories and be able to see first hand how AMG helped these people get their financial life's back on

Chris L says:
September 14, 2012

I couldn't agree more. I have had a payday loan once, only because I really really needed. That's their target market, they know if your desperate enough you will do whatever is needed.I paid mine back straight all in one go but I know many people cannot do that and get caught in a cycle. The government should do more to control the lenders in my opinion.

zQDbaegl says:
February 19, 2013

Stop trying to bororw your way out of debt. Say it out loud so you can absorb the absurdity. I'm trying to bororw my way out of debt. Whatever you do don't pay attention to all these people telling you sites where you can make thousands overnight. Or, sites where they will loan you money. They are working for the other team. Look at some of their other anwsers. All they do is troll the answers pages and suggest you go to their site to bororw more money.That being said: You need to buckle down. Get a second job, get a roommate, get a border, get rid of a car with a car payment, get on a budget, move back in with your parents(temporarily), get rid of cable tv or any other unnecessary bills, stop contributing to a retirement plan until this mess is cleared up,etc .There are numberous things you can do besides bororwing more or declaring bankruptcy. If you get these things in place then call your creditors they will probably work with you. What have you got to lose except some free time?

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