When faced with an unexpected expense right before payday, consumers often debate between letting their checking account go into bank overdraft or taking out a payday loan.
Analyzing the Numbers
The average bank overdraft fee is approximately $35 per transaction. If you trigger 3 small transactions on an overdrawn account, you can quickly rack up $105 in bank penalties for just $50 worth of purchases.
In contrast, a state-capped payday loan for $100 typically incurs a flat $15 fee. If used responsibly as a one-time emergency solution, a payday loan can actually save you money compared to multiple stacked overdraft penalties.
Conclusion
If you face multiple pending debit transactions that will trigger separate $35 overdraft fees, taking a small payday loan for a single $15 fee is mathematically cheaper—provided you repay the loan in full on your next paycheck.