Payday Loan Cash Advance Debit Cards

Millions of Americans are struggling to make ends meet in today's turbulent economic environment.

And despite recent government interventions aimed at loosening up credit restrictions among the bank industry, many consumers still find it difficult to secure even a short-term loan.

For those who are unable to acquire a loan from their bank, a possible option is a cash advance, also known as a payday loan.

How Payday Loans Work

Payday loans are short-term loans that provide a smaller-than-usual repayment window. While a home loan might span 30 years, a payday loan should be paid off within 14 to 31 days - essentially by the borrower's next payday.

To acquire a payday loan, the borrower writes a personal check for the amount borrowed plus any finance charges. The lender then holds the check until the next payday, at which time the loan and finance charges must be paid in one lump sum.

To pay a payday loan, the borrower can pay the lender directly and redeem the check, allow the check to be deposited by the lender or pay additional finance charges to roll the loan over for another pay period.

Payday loans also are available online, through which the borrower provides his or her banking account information. The amount borrowed is typically deposited directly into the borrower's account.

While payday loans serve as a convenient means to acquire short-term loans, they do have some risks that should be considered carefully. The primary risk associated with payday loans is the high annual interest rates tied to the loans, which are paid as the loan's processing fees.

A typical payday loan could come with a 400 percent APR, with finance charges ranging from $15 to $30 just to borrow $100. In contrast, a small-loan company would typically charge an APR of only 24 percent to 48 percent and would allow the loan to be paid off in small installment payments.

Overtime, the cost difference between these two options is significant, which is why payday loans should be used for emergency purposes only and should be paid off as soon as possible.

Payday Loan Prepaid Debit Cards

One of the advances in the payday loan industry is the addition of the cash advance debit card, also referred to as a prepaid debit card. Instead of providing the borrower with actual cash, the lender deposits the loan on a prepaid debit card.

Using a prepaid debit card comes with several advantages:

• With a prepaid debit card, the borrower can enjoy the convenience of paying bills online versus mailing in checks.
• Funds deposited on a prepaid debit card are insured by the FDIC for up to $250,000.
• Many prepaid debit cards are backed by well-known credit card companies, such as Visa.
• Many prepaid debit cards are accepted by millions of merchants worldwide.
• Many prepaid debit cards can be used to access cash from ATMs.

While there are several advantages of using a payday loan prepaid debit card, these cards do come with their own set of fees that should be considered. These fees can include:

• Card purchasing fees;
• Monthly account maintenance fees;
• PIN purchasing fees;
• ATM transaction fees;
• Load fees (putting additional funds on the card); and
• Account closure fees.

Before acquiring a prepaid debit card, it is important to carefully review and fully understand all of the included fees.