Monthly Archives: September 2014

Cash Advance Loans versus Bank Overdraft Penalty, Which Is More Expensive

Everyone gets in a bind every now and again and sometimes money is just too tight to process. However, when it comes to quick money, there are a few things to consider. The main argument is if it is better to take a cash advance loan or just let your account overdraft. While both are options that should be avoided if at all possible, it is beneficial to think about what factors may lead to these circumstances and which is the best option for you.

First off you should know a bit about what each option entails. With cash advance loans you generally write the company a check for the amount you are borrowing plus the charges that are going to be applied. The company keeps the check until an agreed upon day and then cashes it. This is fine and dandy if you have the money in your account or if you are able to make payments on the loan that you have taken out. If however you are still stretched thin when your paycheck comes around, you may need to think of other options.

With a bank overdraft fee you generally pay a flat fee for each time that your account is over drawn.
This means that if you for instance have three bills coming out and the second bill is the one that overdraws your account, you bank will generally pay the amount then charge a fee for doing so. In most cases this is $35 or so. The bank will then cover the third bill as well and apply another $35 fee. This is also fine if you have the money to get your account back in the black.

The argument stands, which method is best and less expensive?
The answer may surprise, you, it really depends on the individual situation of both the lender, the bank, and the individual. If you are only going to overdraft one time then you get your money in order and do not do it again, it is much less expensive to overdraft. However, if you overdraft often or multiple times in one month the fees may become more expensive than fees that are applied by a cash advance loan.

The same goes for cash advance loans, if you are only borrowing once then you do not have to do it again, this is much cheaper than over drafting multiple times. Also, if you are taking out your first cash advance loan the interest may be much lower than both the fees for future loans and the fees that a bank charges for overdraft. In most cases you can talk to your bank and get overdraft protection that is not as expensive as just over drafting every now and again. Most banks have programs that have lower fees that are geared toward people that tend to overdraft to help alleviate some of the fees.

Who Regulates Lending Offers From Credit Unions

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Most consumers never consider who it is that regulates their lending institutions. Not many average citizens are anxious to wade through and decipher all the acronyms and abbreviations that make up the alphabet soup used by government agencies at both the state and federal levels.

As far as Credit Unions are concerned, all Savings & Loans, Saving Banks, and State-chartered credit unions are regulated by a specific department known as the Division of Financial Services. Federal credit unions will generally have the term ‘federal’ or ‘federal association’ or initials like ‘F.A.’ or ‘F.S.L.A’ found in their name. Federal Savings Banks and Federal Savings & Loans are regulated by the OTS (Office of Thrift Supervision).

Because traditional financial institutions are creating more complex banking rules, while at the same time raising their rates on everyday services, many people are searching for different kinds of banking alternatives. Credit unions give them that.

A credit union is a nonprofit organization with 2 main goals. One is to offer easy-to-get services for a cheaper price. The other is to spread out those proceeds coming into their organization to its members. A credit unions customers are the ones who are participating in that credit union.

Being controlled by the members make a credit union a ‘cooperative’. It is also represented by its own board of directors. Members of a credit union are seen as being owners, which gives them the right to run for board positions and to vote. A credit union will consider ‘one member’ to be ‘one vote’, irregardless of their financial assets. As a board member, there is no financial compensation for their service.

The structure of a credit union is different than those for banks. They are nonprofit partnerships whose main goal is making money for its stockholders. The profits from credit unions are constantly being reinvested, which enables them to offer lower interest rates for their loans. Because they are nonprofit, they are exempt from most all state and federal taxes as well.

Credit unions are indeed nonprofit organizations, however, they are very carefully regulated. The NCUA (National Credit Union Administration), is a federal organization that independently regulates and insures members’ savings while regulating how the credit unions operate. They issue annual grades for each credit union. This yearly assessment is a reflection of a credit union’s management and fiscal health. The NCUA works very similar to the FDIC (Federal Deposit Insurance Corporation), and insures deposits as high as $250,000.

What makes credit unions stand apart from the traditional banks is the addition benefits it can give to its members. Those benefits include lower balance requirements, more competitive interest rates, less stringent loan requirements, and lower fees