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Paycheck$ and Politics Newsletter: Issue 38
  • The average ($500) payday loan comes with an interest rate on the high side of 500 percent APR (Annual Percentage Rate) for 14 days. Comparatively, the average credit card cash advance from a bank-issued card carries an interest rate close to 100 percent APR for 14 days while a cash advance from a credit union carries an interest charge of only 11 percent APR. Overdraft protection from banks and credit unions also carries a much lower interest rate than traditional payday loans, about 18 percent APR.
  • Fifty-seven percent of traditional payday loan customers have a credit card, enabling them to take out a credit card cash advance at one of the 13,420 member financial institutions across the country. A form of identification and the credit card are all that are needed.
  • Every payday loan customer already has a checking account at a financial institution. This is a prior requirement for every payday loan. Most financial institutions offer a small line of credit tied to a customer’s checking account as a form of overdraft protection. There is usually no fee for this service, but the interest must be paid for as long as the loan is outstanding and the interest rate is typically 18 percent APR or lower.
  • These two options, credit card cash advances and overdraft protection, are currently available for Arkansas consumers and carry a much lower cost than does a traditional payday loan.
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