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.

Kyle Burton
Kyle is a contributing author who works for a number of financial portals in the online lending space. He has been covering the consumer loans and finance markets since 2006, his focus is to uncover topics that help borrowers get out of debt and save money daily. You can connect with him on Twitter, LinkedIN and Google+