Coosa Pines Federal Credit Union

Money Management

Payday Loans: The Hard Truth About Some "Easy" Money

Short on cash? Need just a little more money to get you through to payday?

Step right up and take out a payday loan. Payday loan cash advances will provide you with the $300 to $400 you need to get by until your next paycheck arrives. The price? At most payday lenders interest rates from 300% to 1,000% APR (Annual Percentage Rate) on up.

Alternatively known as cash-advance loans, post-dated check loans, or delayed deposit check loans, payday loans are a star product at check-cashing outlets, pawn shops, or Web sites. Touted as a convenient financial Band-Aid, they exact exorbitant fees from consumers.

How it Works

Typically, a customer writes a postdated personal check to a check casher for the amount he or she wishes to borrow -- plus the fee. The check casher holds the check until the customer's next payday, say two weeks down the road, at which time the consumer can redeem the check with cash or a money order; allow the check to be deposited; or renew, or roll over, the loan by paying an additional fee.

Companies frequently assess fees of $10 to $35 per $100 borrowed. So, if the fee is $20 per $100, a customer needing $100 would write a postdated check for $120, dated 14 days down the road.

Stated as an APR, the fees are shocking. According to a 2005 Public Interest Research Group (PIRG) report on the payday loan industry, the most common APR on $300 borrowed for 14 days was 521%. The fees climb even higher if a consumer rolls over the payday loan. Before long, escalating charges dwarf the original balance.

Your First Stop for Loans Always Should be Your Credit Union

Say a member pays $360 to borrow $300 for one month from a payday loan company. If he were to take out a $300 unsecured personal loan at 15% APR from his credit union, he would pay only $3.82 in interest if he pays back the loan within a month. "You'd end up paying 16 times more for the payday loan than the credit union loan," says Mike Schenk, vice president of economics and statistics at the Credit Union National Association (CUNA). "That's before you take into account any other fees you might be charged."

If you're short on cash, contact a Coosa Pines FCU loan officer to explore your options before you turn to a payday loan. If you're already caught up in payday or cash adavance loans, your loan officer may be able to help you break the cycle.

For more help managing your finances, or to speak to a financial counselor, use BALANCE, a free service from Coosa Pines.

Back to Money Management

Understanding Overdraft Privilege

Overdraft Privilege helps protect you against having items returned in the event of an inadvertent overdraft of your checking account by giving you a reserve for emergencies or unexpected situations.

There is no fee for having this privilege on your account; you are only charged if you overdraw your account.
You do not have Overdraft Privilege on your account until you receive written confirmation from us that it has been added to your account.
To keep Overdraft Privilege, your account must remain in good standing, which means:
- Continuing to make regular deposits to your account within each thirty-day period.
- Bringing your account balance to a positive balance within each thirty-day period.
- You are not in default on any loan or other obligation to Coosa Pines FCU.
- You are not subject to any legal or administrative order or levy against your account with us.

How Overdraft Privilege Works for You

Overdraft Privilege is not a line of credit. However, if you overdraw your account, we have the discretion to pay the overdraft, subject to the limit of your Overdraft Privilege.

For example, suppose you do not have Overdraft Privilege and your account balance is $50:

If you have a debit item for $100, Coosa Pines FCU will charge your account a fee (currently $28) for having an item with insufficient funds, and will then return the item if adequate funds aren’t available.
In most cases, the establishment where you made the transaction will require you to pay for the item and will normally charge you a fee (usually around $30) for writing an NSF item.
This means that you have now incurred two fees ($28 Fee at Coosa Pines and $30 at the merchant) for an item that wasn’t even paid!

However, if you had $500 of Overdraft Privilege, here is how the situation typically would have worked:

When the item arrived at Coosa Pines FCU, we would pay the item and charge you the $28 fee for an overdraft transaction.
The total charge to you would have been $28 compared to $28 PLUS $30 in merchant fees if you had not had Overdraft Privilege.
Additionally, you avoid being added to any bad check lists on the check approval networks or with the merchant.

Making It Balance

When you use your Overdraft Privilege, you must remember to subtract the overdraft fee from your account balance. In the example above you would have subtracted $128 from your account: $100 (the amount of the check) plus $28 (the amount of the overdraft fee).

Remember that any additional items that come in while your account has a negative balance will also be charged the NSF fee of $28 per item. It is important to record these fees. The next deposit that you make will bring your balance to the amount of the deposit minus the amount you were overdrawn (including any overdraft fees).

Understanding Uncollected Funds

If you make a deposit and are informed that a HOLD will be placed on some of the funds deposited, those funds are NOT available for you to withdraw until the date indicated on your notice or receipt.

If an item is presented for payment while the funds in your account are on hold and you have Overdraft Privilege on your account, you will be charged a negative funds fee of $28 to pay the item even though you have a positive ledger balance in your account.

For example:

You have $100 in your checking account and deposit a $700 check on which we place a $500 hold ($200 is available to you immediately) for 3 days. Although you have a ledger balance of $800, only $300 is “available” for checks or other debits to be paid.
If you have a $500 Overdraft Privilege in the example above, you have available to you $800 to pay debit items. However, you will be charged a $28 fee for any debits paid against your account in excess of the $300 shown above as “available”.

Points to Remember About Overdraft Privilege

Every debited item on an overdrawn account will be charged an OD fee of $28.
You must promptly repay the amount of the overdraft and any overdraft fees.
Your Overdraft Privilege will not be included as part of your available balance at an ATM.
You must bring your account to a positive balance within 30 days, or the Overdraft Privilege will be removed from your account.
You do not have Overdraft Privilege until you receive a letter telling you that it has been put on your account.
You must opt-in to payment of overdrafts for ATM and everyday debit card transactions.

If you have questions, please feel free to call or stop by your local Coosa Pines branch. We'd be happy to help!

Back to Money Management

Avoid Overdraft Fees

An Overdraft Occurs When You Try To Spend More Money Than You Have Available in Your Checking Account

For example, let's assume you have $40 in your account. You ask the phone company to electronically deduct $35 from your account to pay your bill. You now have $5 available. Next, you use your debit card to make a $10 purchase. You could overdraw your account if the credit union allows the $10 transaction to be processed. This could cost you expensive overdraft fees.

The amount you are overdrawn plus any overdraft fees will be deducted immediately, in full, from your next deposit(s) -- including from payroll deposits made by your employer, government benefit deposits, and other direct deposits on which you may depend. These deductions will lower your account balance once again and may increase the risk of more overdrafts and costly fees.

Back to Money Management

The Opt-In Rule

ATM and Point-of-Sale Debit Card Purchases

In 2010, federal regulations took effect that provide certain protections for consumers when their deposit accounts are overdrawn. Bank customers and credit union members have a choice whether to opt-in to a bank or credit union's overdraft program. Consumers must authorize their financial institution to pay ATM and everyday debit card transactions that exceed their account balance. This is called the "opt-in rule".

If you do not opt-in, Coosa Pines FCU will decline your ATM withdrawals and point-of-sale (POS) debit transactions if you do not have enough money in your account to cover the withdrawal or purchase.

What Fees Will I Be Charged if the Credit Union Pays My Overdraft?

Under our standard overdraft practices, we will charge you a fee of $28 each time we pay an overdraft under Overdraft Privilege. There is no limit per day on the total fees we can charge you for overdrawing your account.

If you want Coosa Pines to authorize and pay overdrafts on ATM and everyday debit card transactions, you may opt-in by submitting a form online. Alternately, you may:

Call Member Services at (256) 378-5559, option 3, or call your local branch,
Email us at accounting@coosapinesfcu.org, or send a secure email through Virtual Branch online banking,
Or complete the printed form and present it at any branch or mail it to: 17591 Plant Road, Childersburg, AL 35044.

You may revoke your authorization for Coosa Pines FCU to pay these overdrafts at any time by any of the above methods. Your revocation must include both your name and your account number, so that we can properly identify your account.

Read "Points to Remember About Overdraft Privilege"

Back to Money Management

Archived Credit Union Articles