#711 Accidental Loan

The banking industry has a love/hate relationship with the payday check cashing industry. On the one hand, they know that their bank loans have better chance of being paid on time thanks to check cashers. On the other hand, they envy the rates check cashers can charge.
Which, by the way, are drastically overstated. In every tirade I’ve read against the check-cashing companies they always roll in the fees as part of the overall interest rates cited. Why, they’ll say, that’s the equivalent of 400% a year!
The regular banks like to sniff their noses at the upstart check-cashing places. Which is funny because they are the ones that loan the money to check-cashing places to start with. You can bet they make their prescribed number of ounces on that ol’ pound of flesh.
And numerous “legitimate” banks, as they like to think of themselves, own stock in check-cashing places that helps prop up their corporate bottom line.
But here’s the most interesting thing. I once overdrew my checking account to the tune of five dollars. Yep. I accidentally borrowed five dollars from the bank. A bank I’d traded thousands and thousands of dollars with over the years. Which money they used freely to invest for greater returns—maybe even in check-cashing places.
Well not completely freely, they paid me a quarter percent interest for the privilege of using my money.
They also charged me $30 in overdraft fees for that $5.00 I accidentally borrowed. Which, if you use the math of payday detractors, is like what, 600% interest?
No you say, that’s a fee.
Fine, then it’s a fee for everyone and you can’t roll the check-cashers fee in as part of their interest equation.
Because for every $5.00 I borrowed, the bank would have kept dinging me another 30 bucks.
And don’t think the banks don’t know what a cash cow that is. The other day I saw this billboard from a bank and it said “sign up with us and get one free overdraft a year!”
Yeah, heh heh, the first time’s free...
That’s the other reason banks hate check-cashing places.
They’re losing the income from their exorbitant overdraft, um, fees.
America, ya gotta love it.