Payday Loans Trump Credit Cards for Some

Hers a bit of information that is at once odd, interesting and troubling. According to data recently compiled by a well-known loan company, more and more consumers are choosing payday loans over credit cards.

Perhaps choosing is the wrong word. Because of the recession, high unemployment and the actions of the credit card companies, I’m guessing that many of these people simply have nowhere else to turn to.

Even middle-class families who traditionally would turn to their credit cards in tight financial times are now using payday loans to get through the rough spots.

Many have lost their credit cards or are simply fed up with rising interest rates and fees along with the reduction in credit limits.

It certainly is understandable why more and more people are not using credit cards, whether by choice or not, but the increased use of payday loans is troubling.

If you are not familiar with how payday loans work here’s a quick explanation:

Payday loans are small, short-term loans drawn against an individual’s next paycheck. Typically they have very high usury fees; $15 for every $100 borrowed. They are also commonly referred to as cash advances.

Perhaps when facing an incredible financial bind using a payday loan to tide someone over is understandable. The problem is that most of the people are actually return customers that will go back to re-borrow again and again.

The money they are losing on these exorbitant fees is absolutely astounding. While proponents of the payday loan industry claim they are providing a valuable service, critics contend that they are nothing more than loan sharks.

Credit Card Issuers Fight Back

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