Bank gets into cash advance service - East Valley Tribune: News

Bank gets into cash advance service

Print
Font Size:
Default font size
Larger font size

Posted: Saturday, March 26, 2005 6:04 am | Updated: 8:00 am, Fri Oct 7, 2011.

Wells Fargo is now offering a cash-advance service similar in concept to those of the payday loan and check-cashing stores that have proliferated across the East Valley.

The financial services giant’s Direct Deposit Advance service is available only to its checking account customers who have direct deposit. The bank is quick to point out differences between its service and cash-advance services offered by payday loan and check-cashing outlets.

"It helps customers manage money during financial emergencies," said Marjorie Rice, Wells Fargo spokeswoman. "Say I’m paid on the first and 15th of the month, and I have a really unexpected expense, like my kid has to go to the dentist and my dental coverage doesn’t cover it all, and I have to come up with $300 that I didn’t budget for. If I write that check to the dentist, it might bounce."

Instead, Wells Fargo’s direct deposit customers can get an advance to cover that expense, and that advance, including a 10 percent fee, will be automatically taken by the bank from that customer’s next direct deposit, she said.

The loans are in $20 increments, with a financial charge of $2 per every $20.

"A 10 percent rate is comparable with what you would get on a credit card or other consumer loans," said Tanya Wheeless, president and CEO of the Arizona Bankers Association.

In contrast, a 14-day payday loan has a 15 percent interest rate and is compounded over a year’s time. There is no compounding with the Wells Fargo advance because it cannot be rolled over.

Wells Fargo direct deposit customers are allowed to borrow up to half of their monthly direct deposit income, with a maximum of $500.

"One of the most significant differences (between Direct Deposit Advance and payday loans) is that you don’t get to roll it over," Rice said. "You know how those payday loans will work. You need more this week and you need more next week, or month, and you just roll it over."

Customers can get repeated advances, but the credit limit decreases after customers have taken advances for 12 consecutive statement periods.

Wells Fargo’s major competitors, Bank One and Bank Of America, do not offer a cash advance service.

The Valley’s banking industry is competitive and this is another example of a bank striving to remain competitive by offering more services customers want, Wheeless said.

"It’s not a service much like payday loans where you will see offices on every corner where anyone is invited to go in," she said. "I think what you’re seeing with this product is that as competition increases, banks want to do more to keep their existing customers happy, and increasing convenience and flexibility is one way to do that."

Direct Deposit Advance is available to customers with at least one recurring direct deposit of $100 or more every 35 days to a consumer checking account from an employer or outside agency. This does not include accounts held by minors.

  • Discuss

Facebook

EastValleyTribune.com on Facebook

Twitter

EastValleyTribune.com on Twitter

Google+

EastValleyTribune.com on Google+

RSS

Subscribe to EastValleyTribune.com via RSS

RSS Feeds

Spacer4px
Your Az Jobs