Ever had a really bad Christmas hangover? You know, the ones that leave you un-festively soldered to the toilet bowl for hours of endless, Santa-punishing pain?

Well, if you’re not careful with credit this Christmas, you could find yourself in a similar situation as regards your debt.

In fact, I’d argue that Christmas credit card debt is most stressful thing of all.

So if you’re using your credit card for your Christmas shopping, STOP! Make sure you’ve got one of The Best Credit Cards For Christmas Spending and are using your card correctly (for example, not making any purchases on a 0% balance transfer card). 

Fifth Third Bancorp
Is there a link between the availability of payday lenders in a state and the amount that banks collect on overdraft fees? I’m not sure, but CAPS member Robermac suggests there is and notes that with payday lenders on the ropes in the Buckeye State as a result of a legislative defeat, regional banks such as Fifth Third stand to reap a windfall as a result:

Payday lending was defeated in Ohio and many payday lenders will close their doors. This will allow the fees collected by banks to skyrocket. Fifth Third bank is the largest regional bank with the most branches located in Ohio. When a [similar] law [passed] in [Georgia] a few years ago the regional bank gained [from] increased fees from bounced checks.

Here are some details of Fifth Third banks’s payday lending “alternative.”

TERMS:

·      Credit limit is based on total of monthly direct deposits (maximum of $500 or half of total monthly direct deposits-whichever is less).

·       Fee is $1 per $10 borrowed

·       A payment towards the advanced amount and fee is automatically made when the bank receives your next direct deposit. The bank will pay off any balance owed, up to the deposited amount, on the day of the deposit. If the advance is not paid in full prior to 35 days after the advance, the remaining balance will be deducted from the checking account.

The advance is paid automatically from the customer checking account when the next direct deposit hits the account, making the loan term anywhere from 1 to 35 days.  The APR varies greatly based on the loan term, ranging anywhere from 3,650% to 104% APR.  To actually receive a 120% APR loan, the APR quoted on the site, the loan term would fall between 30 and 31 days.  The bank takes on little, if any risk, by offering these loans, because they have direct access to the customer checking account the moment the direct deposit comes in to the account.  

The FDIC began a pilot program this year to have traditional financial institutions offer micro loans at interest rates that payday lenders have said are unprofitable. While thousands of loans have been made, it’s not a runaway success because the banks are finding it hard to make money just as the payday industry has. One of the things not addressed in the pilot program, though, is providing loans to people with poor credit. Payday lenders do that every day; banks won’t loan money to someone who has bad credit.

Because they have the imprimatur of the federal government, banks have the right to employ the same programs payday lenders are castigated for. Perhaps that explains why they’ve been so vociferous in their support of restrictions on payday lenders: They just don’t want the competition.

“Arkansas’s attorney general wants to shut down payday lenders in his state, and he’s sent letters to some 60 companies doing business there, telling them to pack up, ship out, and — oh yeah! — forgive all the debts of the people who borrowed money from them…For individuals needing small bridge loans — well, tough luck! You can’t have one. 

One which the Pundit is enjoying exploring today is the “How much am I spending?” calculator. 

The calculator allows you to input your actual spending habits and your goals and then calculates how much you have available for investment and gives a projection of what that investment would amount to in 10 years. 

How does this relate to payday lending?  Storefront payday lenders collected $6.5 billion in fees in 2006.  And payday lending customers understand exactly what they are paying per $100 for their two-week loan.  Members of CFSA are required to post their fees on poster-size displays in large type.

Yet, nobody is calling for a ban on banks.