Bankrate.com has released the results of their Fall 2006 Checking survey, finding that it’s the “punitive fees that are taking the biggest bites out of consumers’ wallets.” The average bounced-check, or nonsufficient-funds (NSF), fee is now at a record high of $27.40.
Critics of the payday lending industry hype the “triple-digit APRs” as a reason to limit or prohibit payday loans, but the Bankrate survey results underscore what the payday lending industry has always said, that the cost of a bounced check typically exceeds that of a payday loan.
In fact, when expressed as an APR on identical two-week terms, a payday advance compares favorably: $100 payday advance with $15 fee = $391% APR; $100 bounced check with $27.40 fee = 714% APR. The average $26.64 merchant fee (CFSA 2006 National Fee Survey) brings the bounced check APR to 1,409%.
Research shows customers recognize payday advances can sometimes be their best option for low dollar short-term credit-- understandable, given the rising punitive fees associated with checks drawn against nonsufficient-funds, bounced checks covered by “courtesy” overdraft protection and late payments on credit cards and other routine bills.
Read Fall 2006 Bankrate Checking Study
View Average Bounced-Check/Nonsufficient Fund (NSF) Fee Comparison Chart