A bounced check, credit card late payment penalty?

[snoozy]

Here is a surprising article on a dilemma which more and more people may be facing:

"Riding on the DC Metro last week, I saw a billboard that caught my attention. It asked which was financially more costly, a bounced check, a payday loan, or a credit card late payment penalty. The answer surprised me, and it’s worth considering this question. Most all of us at one time or another have bounced a check (I have), obtained a payday loan (I haven’t), or paid a credit card payment late (I have). For many of us, a bounced check or late credit card payment is the result of disorganization or distraction. But in some cases, tough choices have to be made.

Imagine that a $100 credit card payment is due, but you don’t have the money to make the payment. And to make matters worse, payday is a day AFTER the payment is due. So what are your options? One option would simply be to make the payment one day late. You’ll incur a late payment penalty and your credit score may be adversely affected. You could send in a check on time, hoping that the credit card company didn’t present it to your bank until the day you get paid. If it reached your bank too soon, however, you’d end up paying a bounced check fee AND a credit card late payment penalty. And finally, you could get a payday loan to cover the $100 payment, and pay the loan back on payday.

So let’s look at the cost of each of these options to see which one is the most expensive..."

Read the results here: http://www.doughroller.net/payday-lo...ore/#more-2272

[The Paw]

I don't think the analysis in the article is necessarily true.

First off, not all credit card companies charge a late payment penalty for missing by one day. I have a Mastercard where they simply charge the interest on the balance. Unless you were going to pay it down to zero, you would have interest charges anyway, so the extra day doesn't necessarily cost you more.

Secondly, getting some overdraft protection at you bank could cover that cheque at a much lower cost than bouncing a check or taking a payday loan. So planning ahead is a better option.

I assisted in a research project on payday lenders. They are predatory in nature, and it is not just the high cost of borrowing, but the danger of the credit spiral that makes them undesirable. If you borrow against that paycheque, then you can end up short for the bills you pay on payday. People end up renewing these loans and digging into a deeper and deeper hole.

I don't know anything about the site, but it would not surprise me a bit if they were shilling for the payday loan industry. They are under some scrutiny these days, and a public relations counteroffensive is inevitable.

[cfabe]

I have a bank account with $250 of automatic overdraft protection that only charges me a modest interest rate (less than a credit card) when I use it. No overdraft fee or bounced check fee. So I would just rely on that until payday to pay the minimum on the credit card, then pay the balance after payday.

[Beeman]

Which explains why there are over a dozen payday loan places in our little town and the flow of people in there is amazing. The best part is at no point does anyone consider the option of stop spending money they don't have.

[Madame]

I avoid bounced checks by putting an extra $100 in the checking account and not making an entry for it. So, no bounced checks and a little extra cash when/if I close the account some time in the future/

[snoozy]

Well, I don't have a credit card nor these days a paycheck, so it is all an intellectual exercise for me anyway. I have heard so much bad press about payday loan operations that it would never occurr to me to go there. But it seems to me that credit card companies are about as predatory as they get. Yes, of course, if you spend more than you take in, you are going to be in trouble no matter what strategy you use. (Just like if you take in more calories than you use, you will be in trouble.) Yes, of course, if you don't pay off the balance every month, blah, blah. But these days, stuff happens.

[Old Vet]

In Arkansas the payday centers have been closed. They charge too much interest even if you pay it off the next day.

[house06]

Whats worse than a bounced check, payday loan or late fees on late/unpaid credit card charges?
Someone else who bounces checks, defaults on payday loans, doesn't pay her credit card bills, dr. bills, attorney fees and uses your home phone as her phone number.

Yes, a local person in my hometown who I absolutely do not know, used our phone number for more than a year to avoid phone contact from her creditors. Finally, we had enough and changed our phone number. Between the bill collectors and folks calling for the local salvage yard, I was ready to rip our phone out of the wall.

[snoozy]

Originally Posted by house06

Whats worse than a bounced check, payday loan or late fees on late/unpaid credit card charges?
Someone else who bounces checks, defaults on payday loans, doesn't pay her credit card bills, dr. bills, attorney fees and uses your home phone as her phone number.

Yes, a local person in my hometown who I absolutely do not know, used our phone number for more than a year to avoid phone contact from her creditors. Finally, we had enough and changed our phone number. Between the bill collectors and folks calling for the local salvage yard, I was ready to rip our phone out of the wall.

Man! That's annoying!

[Drew Cutter]

Their was a law passed recently here in ohio banning Payday from certain practices.

Discover his bad when it comes to late payments. Depends on the credit card company and whether you taken advantage of credit card insurance (for people who get ill , fired , etc ).