Tuesday, March 31, 2009

"Direct Deposit Advance"

So this unnamed bank will "lend" you your own money, at a 120% APR? (via Boing Boing):

This time, the nice lady at the counter asked me if I needed immediate access to the deposit?
Huh? Said I. Looking at the payeee - "I think the check will clear..."

Oh, it is not that, said she, it is just that some people need immediate access to their deposits, like same day, or tomorrow, and if you did we can expedite it.

Oh, that's nice, thought I, and said "no thanks, got enough balance to cover any outstanding transactions thanks, but been there..."

so, I wandered off, and suddenly though - well was prompted by my better half to think - "expedited? at what price?"

So, I checked online - there is nothing about expedited access to deposits, rather a guarantee that deposits before 4pm are available same day... or next day.
Unless: several reasons, none of which apply to me, nor, I sincerely hope, the payee.

But, there is "direct deposit advance".

"The Finance Charge is a one-time transaction charge and is not dependent upon the length of time the advance is outstanding. The Finance Charge is $2.00 for every $20 that is advanced, which equates to an Annual Percentage Rate (APR) of 120%."

In short, when you deposit a check that for whatever reason the bank elects not to immediately post to your account, they will "advance" you funds at flat fee that is the equivalent of 120% APR. As this blogger points out, most banks offer overdraft protection, which already permits you to take an "advance" of a sort against your account (while incurring fees that also equate with an exorbitant APR.) And of course, the only reason you might need and advance is if the bank itself places a hold on your check so that funds don't appear in your account until after a certain period of time. But either way, this amounts to a bank in effect loaning you your own money, and I'm of the opinion that it ought to be completely illegal.

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