Quick cash from a payday loan not worth the cost

Banks are now making it easier for marginalized Canadians to open an account

Purchase Quick cash from a payday loan not worth the cost

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CALGARY, AB, Feb 19, 2015/ Troy Media/ – When cash is tight, do you make a quick trip to your neighbourhood payday lender to arrange a payday loan rather than call your creditor’s to arrange to keep the phone or lights working until payday?

If so, you’re paying a high price for convenience, casual atmosphere, and speedy transactions – one that could keep you hooked on loans instead of building up your bank account.

If you’re a regular quick cash store customer, your first step to building your wealth could be finding a banker who will work with you, even if they can’t sell you investments or a mortgage right now.

Don’t be exploited with a payday loan

We’ve all read news stories about banking fees eating up small balances and unbendable bankers more bound by their need to make money than serve customers. But doing business with a chartered bank is a bargain compared to paying interest on a fast cash loan. If you want to see unbendable rules in action, trying re-negotiating a lower interest rate on that extension you need on your quick cash loan – a rate that could make you an accessory to your own exploitation.

Interest rates charged by pay day loan joints are well over 100% annually

The Criminal Code of Canada makes charging more than 60 per cent interest per year illegal. Yet, in some cases, interest rates charged by pay day loan joints are well over 100 per cent annually. Not only does law enforcement barely take notice, thousands of Canadians line up for fast cash, cheque cashing, and pre-paid credit cards. Some even use the quick cash stores in lieu of getting a bank account at all. What gives?

Common wisdom says it’s the bank’s fault – that their service charges are too high, that people with bad credit history or low income aren’t as welcome as middle-class customers who want to invest their money, buy investments, or build retirement portfolios.

It’s true that some banks have moved out of low income neighbourhoods in the past 20y years. It’ also true that bank marketing tends to target higher income Canadians, but it seems the banking industry may be starting to change its ways.

On January 15, Canada’ s chartered banks began offering all Canadians access to basic bank accounts for $4 per month. These basic bank accounts have the following features: a minimum of 12 debit transactions per month, at least two of which can be done in-branch (if available), cheque writing privileges, authorized payments, monthly printed statements, and either cheque image return or online cheque imaging. There’s even more good news: youth, students, seniors receiving the Guaranteed Income Supplement, and Registered Disability Savings Plan (RDSP) beneficiaries can get these services for free.

Even a bankruptcy won’t prevent you from opening a basic bank account as long as is no fraud or crime associated with your bankruptcy.

Of course, to take advantage of one of these low fee bank accounts you must prove who you are. That’s a challenge for marginalized Canadians, who may not even venture into to a bank to open an account because they do not have Government ID. Without photo ID, they have no option but to cash their paycheques and tax credit cheques at quick cash stores.

Convenience primary reason for getting a payday loan

Some provinces make photo identification cards too expensive for low income citizens. For example, Alberta charges $51.45; Ontario charges $35.00 for a provincial ID card. Eliminating fees would go a long way to helping vulnerable citizens in those provinces obtain identification they require to open up savings accounts and cash government cheques at banks.

Still many fast cash customers are not marginalized Canadians. According to the Financial Consumer Agency Canada, they cite convenience as their primary reason for using quick cash stores.

Are you one of them? Maybe it’s time to ask whether quick cash is worth the cost.

Jane Harris-Zsovan offers her readers practical money advice for the real world. Jane is the author of Eugenics and the Firewall: Why Alberta’s UFA/Social Credit Legacy Matters to 21st Century Canadians.

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