Cash Advance Fees

Typical Fees

With many cash advance and payday loan companies, the cost is only identified towards the end of the application process.

You will find that most reputable personal finance companies use the same formula. The government has set fee and term maximums for each state.

Typical fees range from $20 up to $75, depending on the amount of the loan and the duration. While this can break down to 15% to 20% interest for the duration.

The most common payday loan fee is between $15 and $17 per $100 loaned for approximately 14 days.

This sounds high to many who do not appreciate the costs of the marketing, delivery and servicing/collection of the product. Those in the business are required to maintain storefront operations, market their services and service and collect loans.

Compare the cost of the ability of a consumer to pay $17 for a $100 loan versus paying $25 to $28 for a bounced $100 cheque.

Payday advance fees typically cost less than clients' alternatives.

Bank/merchant fees on one bounced check can cost three times that of a $100 advance. The bank expects the cheque to be made good the next day, the payday lender allows for a 10-14 days period.

Payday advance APRs are often lower than clients' alternatives (on the same 2-week term)

$100 payday advance with $15 fee = 391% 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 fees = 1,304% APR

Source: CSFA

Comparison of product cost must take into consideration the costs of delivery, convenience to the consumer and the ease of obtaining the product. Operators must maintain and staff storefronts, advertise to consumers, stay open longer hours than banks and extend advances to a generally higher risk clientele. The market allows and governs the cost of the payday loan to the consumer. Industry studies indicate that a consumer uses the product an average of 7-9 times a year. The industry trade association and most regulations limit the size of the transaction and require the loan to be paid off by a due date or within 3-4 transactions. Critics will still cite rollovers and cycle of debt them as ills of the payday loan business. These are not valid considering the lower cost of payday loans and no embarrassment of returned checks.

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