Regional banks U.S. Bancorp and Wells Fargo & Co. offer “checking account advance” loans that allow customers with direct-deposit accounts to access funds before they are credited to a customer’s account balance. The short-term loans carry annual interest rates of about 120%.
Doesn’t this sound familiar? Payday Lenders can also “advance” you money in your paycheck, but you have to go down and apply each time for a loan. Wells Fargo, in contrast, offers the “ease and convenience” of just getting one online, an ATM or the phone.
On the Wells Fargo website, to their credit (to their very little credit, in my opinion), they advise against using this service, remarking payday advances are “very expensive”. (OK, then why offer it?) From the Wells Fargo website, I did not see any restrictions on direct deposit advances per state. What this means is that even if you live in states which caps small loans to under triple-digit annual percentage rates (APR), you can still sign up for and receive direct deposit advance loans from Wells Fargo, effectively exempting them from payday loan legislation.
The states which have caps on small loan interest rates (targeted at payday loan lending):
| Arkansas Connecticut District of Columbia Georgia Maine |
Maryland Massachusetts New Jersey New York |
North Carolina Oregon Pennsylvania Vermont West Virginia |
Puerto Rico Virgin Islands |
On March 1, 2005, the FDIC announced revisions to its guidelines allowing its member banks to participate in payday lending. The guidelines seek to “ensure that this high-cost, short-term credit product is not provided repeatedly to customers with longer-term credit needs.” Thus, the FDIC has taken the important step of recognizing that payday lending can lead to a debt-trap. (But they still allow it, don’t they?)
Some of these revisions:
- Discourage long term debt cycles by transitioning to a longer term loan after six payday loan renewals. This means if you renew your bank-issued payday loan 6 times in a row, the bank automatically transforms the loans into a long term loan.
- The guidelines also call for banks to develop procedures to ensure that they do not make payday loans to customers who have had payday loans outstanding from any lender for a total of more than three months in the previous 12 months.
- Assuming a typical payday loan of two weeks, the FDIC guidelines would permit six transactions, but then would require the bank to offer to or refer the borrower to a longer-term credit product.
How come the banks can make payday loans while they are outlawed for other institutions? Because the banks are more trustworthy? Yeah right.
Has anyone here used direct deposit advance feature with either Wells Fargo or US Bank? Tell us about it by leaving a comment.
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i have used this service offered by wells fargo and have found it very useful and convinient….i understand the cost of the service but still can appreciate it….it costs less than a payday loan and is easier to obtain the money…they don’t let you take more than 12 advances in a row so there is a deterrent there to discourage you from getting yourself in a hole. however, i have had to declare bankruptcy within the last six months (which wells fargo was not involved in) and they have suspended my use of the service. i didn’t know this when i originally filed for bankruptcy protection. i am not sure when i will be able to use this service (if ever) even though my debt has been oficially discharged. i highly recommend bankruptcy protection to those who do not have any other options (as in my case) but this is one of the consequences i suppose.
I split my direct deposit 50/50 between Wells Fargo and US Bank. This way, I have more than the $500 DDA limit available – at any given time.
By using both banks, I have more than 1 full paycheck of NET PAY in DDA available at any given time.
The DDA is less expensive than a PAYDAY LOAN and most banks are willing to provide a repayment term of over 30 days. Most PAYDAY loan companies provide terms of 14-18 days.
Most banks will let their customers work with the collections department and create easy payment options in order to keep the account open and active.
***WARNING***CAUTION***
TAKE HEED AND LISTEN TO
THE TRUTH THAT LIES WITHIN!
***WARNING***CAUTION***
Before becoming eligible for a DDA,
US Bank forces all customers to wait 6 months after opening the checking account.
Wells Fargo is quite lenient in comparison; DDA is available 2 months after opening the account.
I must say, your post lives up to your myspace page.
Dont do these direct deposit advances! I was with Wells Fargo, and we had to keep getting one every payday just to have money when i got laid off. Well…now its been like 6 months and we couldnt keep it up. So now we owe them 1000$ and growing yet we’re still in the same situation. We changed to another bank just in time and switched the direct deposit, but come taxes-we’ll owe them our refund. Great! Case and point, it will help for a while, but if u truly need it, i would suggest keeping it to 100$ or less to prevent HUGE fees and what happened to us. We got screwed and its our own fault, not theirs. Don’t be next!
Similar, low skilled jobs (no degree or cert. required) throughout America pay same as they did over 11 years ago, but federal taxes and the prices of goods and services have increased. How do the feds resolve this?
As the national suicide rate increases, they raise the federal minimum wage, a stipend- in order to keep the crime rate down and the streets safe.
Why complain?
Lone sharks are the poorman’s best friend!
Similar, low skilled jobs (no degree or cert. required) throughout America pay same as they did over 11 years ago, but federal taxes and the prices of goods and services have increased. How do the feds resolve this?
As the national suicide rate increases, they raise the federal minimum wage, a stipend- in order to keep the crime rate down and the streets safe.
I think they are very nice. I have had a few times when I forgot that I had a payment coming through that would put me $45 in the hole. I did not have any other $$ to put in the bank and pay day was a week away. I was able to advance $60 into my account (a $6 fee) and then I avoided their $37 NSF fee. In my book that is a savings of $29 for me. also helps when you have a few transactions going through. say you forgot your water bill was going through $150. and that day you spent $60 over 8 transactions. I have moved over $80 to cover that ($8 fee) and avoided 8 NSF fees… a savings of $224. Just saying it has saved my a$$ a few times.
I have to admit that DDA really is a nice service. I’ve had times where as a student I was a couple of weeks away from my huge financial aid check, and I just needed some money to get by until then. Before Wells Fargo I had to go apply for a payday loan online and pay those huge fees. With DDA, I can access the funds with no embarrassment, and no risk of being declined. While I don’t recommend it as a long term solution, for people who just need a few hundred dollars to get by, in all honesty, it couldn’t be more helpful. I hope they keep it because while it is a higher APR that traditional loans, I think the convenience and the added sense of security makes all the difference.
i use direct deposit advance at western federal credit union rather it be deposit in checking or savings account its their if i request it you also have 30 days to repay. The maximum is $500 and you pay back $525 but you to have five hundred direct deposit into either one of your accounts and it has to be two paycheck before being able to request it. Also be a member of the credit union for thirty days
I bank with Wells Fargo. I used DDA recently and it really saved me. My rent was due on the 3rd, my and my paycheck wouldn’t deposit ’til the 5th. I was about $30 short for rent and they don’t accept credit, so paying a $3 fee to advance $40 was much cheaper than paying a $40-50 late fee on my rent.
I also called the bank rep who set up my account and she really did caution about using it because it can snowball. I think as long as it’s used in small amounts and responsibly it can be a really great service.
I used DDA after finishing graduate school and relocating to a new state. Money was tight and I hadn’t worked in 2 years. The service was great and I used it in conjunction with a budget. After a few months I was back on track with bills and created a nice savings for myself. I suggested the service to my husband at the time boyfriend and it has been a train wreck for him the entire time. It’s like a credit card philosphy some people know how to use them and some people don’t.
the fees from wells fargo are small (if you’re getting $100 or less advanced) so how much higher is the APR with the regular/more expensive payday loan companies?