Payday Loan

Thought for the day: Can you ever be just whelmed?

Today I called one of those cash advance places. They had sent me a postcard with a coupon for a $25 cash bonus for using their service. Wow! What a deal. That was worth a phone call and so I called. A young lady answered the phone and I told her I had gotten their mailer. I asked what interest rates they were offering on cash loans and she said,
“There is no interest. It’s just $15 for every $100.”

Me: “So the interest rate is 15%?”
Girl: “No, sir it’s just $15 for every $100 that you need. Like, you get one hundred and when you come back you pay one hundred fifteen.”
Me: “Then there is a 15% fee at the time of the cash advance?”
Girl: “It’s not a fee. That’s just what you pay when you pay the money back.”
Me: “So I can take as long as I want to pay it back and still only pay $15 per hundred?”
Girl: “No, it’s only until the next payday, whether it’s two weeks or one month or however you get paid.”
*What if I get paid by the year?*
Me: “Okay, suppose I get a cash advance and do not pay it back when I get paid. You said there’s no interest, is that right?”
Girl: “There’s no interest but you will be charged three nine one point oh seven. That’s an APR.”
Me: “You are charging people three hundred ninety one point oh seven, almost four hundred per cent interest?”
Girl: “There is no interest. That is the APR. You pay the money back on your next pay day. That’s what this is.”

That forty one per-cent interest at the People’s Finance is starting to sound pretty good! Let’s do some math. According to my new friend at the cash advance store they charge $15 for every $100. I went to a small country school but I’m pretty sure $15 is 15% of $100 even in the big city. It’s not a fee or interest. “It’s just what you pay.” Okay, then she told me about the APR which was also not an interest rate and that was 391.07 % APR. Say I get a cash advance from them and pay it back when I get paid in two weeks. They like to deal in APRs, so what is the equivalent APR for $15/100 in two weeks? It’s 390%. At least the rate will stay consistent if I decide not to pay them back at my next payday.

I thanked the young lady for her time and ended the call. But I did call back to find out if I could get the $25 cash bonus if I only advance $100. I wonder how many of these coupons they mailed out. If everyone who received one across America went in with their coupon, advanced $100, received their $25 cash bonus and immediately paid back the $115 they owed, that company would lose a lot of money.

Savings Tip: Go paperless. Just about everyone offers online bill payment now. At 44 cents a pop mailing checks can be expensive. Also, you won't have to reorder checks for a longer time. Many banks are offering cash rewards to sign up for paperless statements and online bill payment. Check it out!