Payday Loans vs. Credit Cards - which are worse to take out cash from? They both have their pros and cons (mainly cons) but if you were in a bind and had to pick one, which would it be?

This debate popped up during my coffee meet up w/ James from Dinks Finance last night (I told you I'd be blogging about it! haha...). BUT, the crazy thing here was that we found ourselves defending opposite sides! He was slamming credit cards, and I was quick to diss those damn payday loans. It was an epic battle of two finance bloggers going head to head ;) Or perhaps a battle of nerds sipping coffee, take your pick.

The question we have to ask ourselves here though, of course, is who's right? Or better yet, which product technically IS the worst of the two? Well, I'm no expert in the field, but this little quote found on the CFA's (Consumer Federations of America) website says it all:

"Payday loans are extremely expensive compared to other cash loans. A $300 cash advance on the average credit card, repaid in one month, would cost $13.99 finance charge and an annual interest rate of almost 57%. By comparison, a payday loan costing $17.50 per $100 for the same $300 would cost $105 if renewed one time or 426% annual interest."

Ca-ching! They also share a pretty interesting cost comparison chart (pdf) and loan calculator that helps to determine what your total costs would be. By the way, for those who aren't familiar with the term "payday loan", it's basically a small short-term loan that's intended to cover a borrower's expenses until their next payday, sorta like a cash advance (also referred to as a paycheck advance or payday advance). They can be taken out online or at physical stores like pawn shops or their own entities.

In fact, it goes without saying that NEITHER payday loans or credit cards are a good answer for getting cash. Borrowing money from family/friends, taking out a personal loan, or just dipping into your savings accounts always trump cash advances when it comes to the fees you'll have to pay. Unfortunately there are times when these aren't an option though - and thus, the reason for this post (other than to prove my man James wrong ;) )

Contender #1: Payday Loans
The average fee you'll pay for a payday loan is somewhere between $17-$25 for each $100 that you take out, but it can get as high as $30 per $100 in some states! So, say you take out a common advance of $500 and you pay it back in full after 2 weeks - GREAT! You had to pay an extra $87.50 on top of the $500 you borrowed, but at least it's over with, right? Unfortunately no, the odds are stacked against you. According to the CFA - "Consumers have an average of eight to thirteen loans per year at a single lender." That's pretty damn scary.

On the plus side, you could argue that since these are mini loans of 2 weeks at a time, it might be easier to pay off and not have it drag on like it may w/ a credit card. That all comes down to personal preference and usage though - I can't really relate to it here.

Then, of course, we have that big ol' stereotype that payday lenders are bad evil people and are out to steal your money! Well, I don't have any facts myself to to say they're shady (although I feel they are), but I can def. say without a doubt that they want your money ;) And unfortunately you're hard pressed to see *all* their fees upfront and readily accessible on their sites - at least on the non-reputable ones.

Contender #2: Credit Cards (cash advances from)
Now let's talk credit cards. As much as I champion my dear credit card for budgeting purposes and the cash back rewards (not to mention the free grace periods to pay back purchases), they're certainly no angels either. According to common knowledge" and the talking heads on TV, the average American household is in about $8,000 debt. Some feel this is a bit inaccurate, but the fact is that many of us are, indeed, ADDICTED to our credit cards.

And if you're already addicted, why not just slap on a cash advance to it right? *shiver*. While usually LESS than paydays (do your research!) you'll still pay a steep price for it - anywhere from 15-25%. Of course, there's also the problem of mixing and matching normal purchases with cash advances. Most cards, if not all, will use your payments to pay off the lower interest items first (like your purchases), and THEN use it to pay off the higher cash advanced amount. It looks like there may be some new rules in place soon that would get rid of this though.

On the other hand, most credit card companys display all the informaton upfront - the rates, the fees, etc. You might actually have to look for it, but it IS there. And usually written in itty bitty font ;) I believe most c/c statements have it all disclosed on the back, but either way it's easily accessible on your bank's website or by placing a 2 min phone call. If you do your research and check around for the best rates, you might be suprised at what you can find.

The Winner: Credit Cards
In conclusion, they both suck and should be avoided like the plague. BUT, if forced to take one over the other, I'd go with my credit card all the way. I'm comfortable with it, I have a good relationship w/ the bank that issues it (USAA), and I can easily go online and pay the advance off at any point (because I don't carry any other balance. And if I did, I could always take out a new card specifically for this purchase and *then* pay it off online).

Now, if only I could remember the reasons James argued for payday loans ;) I'll have to ping him and get him to respond back here. Although in all honesty I'm scared as that boy's a genius at analyzing! Seriously, have you ever checked out any of his posts? whew.

UPDATE: James from Dinks posting up his rebuttal...although his tune has changed ;)


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PS: If you find yourself in a situation and you need help, PLEASE research RESEARCH research! Spending 30 mins now can save you hundreds of dollars later if you don't know what you're getting yourself into. It's easy for me to state my opinions on the subject based on what I know, and what MY experiences have been over the years, but it's not necessarily the best for *everyone*. Only you know that and can judge the best option for yourself.

Here are some other articles I found while researching:
- Payday Loan vs. Credit Card Interest
- Credit Card Cash Advances Versus Payday Loans
- Why a Payday Loan is Better Than a Credit Card Cash Advance

Labels: credit cards, fast cash, loaning money

Cuz I gotta tell you, I'm not that against pawn shops these days. The whole thing seems fairly legit to me: Person A needs money fast. Person A goes to Pawn Shop with valuable stuff. Pawn Shop gives Person A money in return for valuable stuff. Person B comes in and buys goodies at a cheap cost. What's so bad about that?

The fact that they have a bad rap makes it all the more interesting to me. This month's Kiplinger's Mag featured a story on a "Pawnbroker to The Stars" (April, page 88) and it really caught my attention. Not only is business booming, but celebrities and big ballers are using them more and more too! Here's one of my favorite clips from the interview, in response to the embarrassment factor:

"I think there is a stigma attached to going to a pawnbroker. But coming to us for a loan against your beautiful six-figure diamond is no different than getting a loan against your beautiful six-figure home. They're both tangible assets that you own and that you're leveraging to get cash."

Yes, I agree! I'd like to think I'd have no problem visiting one if it really came down to it. But then again, my only experiences with them date back to when I was a kid oooh'ing and ahh'ing at all the fancy video games and electric guitars in the place. I've never actually purchased, nor sold, anything there - nonetheless taken out a loan. In all honesty I've just never needed money *that* bad. Sure I've borrowed and taken out loans for stuff like the first month's rent of an apt. or my college moped, but fortunately life has never demanded I come up with alternative methods.

But let's pretend it did. Why WOULDN'T I hit up a pawn shop? What's all the fuss about? I came up with a list of reasons why they seem so bad, and thus why most people probably steer clear. No science behind it, just me comin' up with my own thoughts on it:

• They look and feel scary.
• They're filled with smoke and scruffy men.
• The neon signs are reminiscent of Vegas sin-ness.
• You get less $ for your stuff.
• If you take out a loan it's probably at a crazy high %.
• You'll probably want to take a shower when you leave.

Put it this way - visiting a pawn shop won't make you feel all warm and fuzzy inside. Then again, if you're in dire need for fast cash, it's probably the last thing on your mind. You just wanna run in, get your money, and slip out. That leads us to all the GOOD stuff about pawn shops....or at least the only ones I can conjure up right now :)

• You can get fast cash!
• You can take out a loan against some collateral.
• You can pick up some items at a bargain price!
  
• They track serial numbers to help cops catch thieves. (so if you're going to steal, which i'd punch you in the face for, don't sell the goods to the pawns! Fox news just did a story on it and they will catch you mr.)

All of these play a key part in the success they have - well, at least the first 3. It's the one place you can get your hands on fast cash w/ not much work. Is it better to sell stuff on eBay or Craigslist, or even take a loan out from a bank? Hell yeah! But again not everyone has the time or options for this. So in these cases the pawn shops play a key role. Plus, you may only need a loan for a short amount of time. So dropping collateral to back up a loan for a few months may be just the thing you need. And the odds you'd pay it back quicker HAS to be in your favor knowing that those scruffy men would keep your stuff and/or go after you! *shiver*

So would I recommend using Pawn Shops? No. But that's not to say they could come in handy as a last resort. The truth of the matter is that some people DO need money at times, and they need it fast for whatever reason. I can certainly see their importance to society.

Labels: celebrity finance, fast cash, reviews

Well my damn if today just keeps getting better ;) First Budgetsaresesexy gets on MSN's Smart Spending, and now our Xmas bonuses just popped outta thin air! Have i been doing extra good deeds that i'm not aware of?

I must admit it's starting to restore my confidence in our employment, that's for sure!This new info means that a) our company has money (yayy!!!!!), and b) the ol' boss appreciates all our hard work this year. If that doesn't boost company morale, i don't know what will.

How much did we all get? $1,500.00 a piece! No special considerations, no scale, no b.s. - just an equal "thank you" for every one of us :)

So what does that mean in terms of take-home pay? Well, it'll probably go a little something like this: $1,500 (original) - $750 (est. taxes) = an extra $750.00 in the pocket! You can't see me, but i'm doing the happy chicken dance right here in my chair.

And naturally i already have a plan for this money - $610 of it will go towards my Holiday Gift Budget (as previously alluded to), and then the remaining $140.00 will go towards Mrs. Budgetsaresexy's Bday presents since she's a December baby like me :) And *then* if anything survives this massive shopping extravaganza, the rest will get applied to my outstanding credit card/auto loan balance. Always gotta have a plan baby!

So THANK YOU boss-man, you have made one little boy's Xmas as merry as it can be this year! And to show my thanks, i shall now get back to doing actual work and stop stealing company time ;) God bless each and every one of you, and may this stream of good news hit you all too!

Labels: career, fast cash, money management

Here in DC, there are ads all over the place for this. Seriously, it's starting to get insane and it's still what, TWO months away?

Some people are renting out their place for $2,000, $4,000, even $10,000! For 4-5 days! Daaaaaaaaaaaang son. There are over 450+ posts on craigslist yesterday alone for this.

This is one of those times i wished i still lived around here cuz i gotta say, i'd be all OVER that! I used to live right off of Wisconsin in upper Georgetown area (which is a pretty good location, esp for partying ;) and older/richer people....being safe and all), and although it was just a studio apartment, it would get the job done for a weekend or so! I'm thinking i could have probably rented it out for let's say, umm.....$1,000 for the weekend?

Although, it might get pretty sticky if you're actually renting it yourself ;) So would probably be best if you owned your place, but maybe it really wouldn't matter, i dunno i'm no expert. The point is, that's a LOOOOOT of money you can earn super quickly, and for basically nothing.

Here are all the pros and cons i could conjure up in a case like this:

The Pros of Being a House P.I.M.P.
For you: $1,000-$10,000 in cash! perhaps some new scenery for a bit?
For renter: their own cozy place! own living room, dining room (presumably), bedroom(s), a whole freakin' place. Plus, no more worrying about hotels all sold out and/or crazies keeping you up all night there.

The Cons of Being a House P.I.M.P.
For you: You'd have to find somewhere else to live for a bit (Hello, Mom?). You'd also be opening up your whole life to strangers! Think: stealing, trashing, etc.
For renter: Could be more expensive to rent out a house/condo than a hotel, esp. the closer the time gets to booking it. Possibly no access to gym/pool/concierge, etc.

This whole thing is pretty insane if you ask me, but that's the beauty of this country - we can do whatever we wish :) I'm gonna keep my eye on this and see how much higher these prices get as time goes on. I guarantee they just get crazier and crazier! Would you do it?

Labels: cockamamy indeed, fast cash, politics