Army

September 7, 2012

Cash advance loans — worth the quick fix?

Legal Assistance Office

A Soldier is short on cash and needs money known as a “deferred presentment service” to obtain that “quick fix”. What people may not realize is that this “quick fix” comes at a high cost. Someone pays for the convenience of having money on hand when they don’t have any money in their bank account.

Cash advance stores take a check for the face value that the individual requests plus a processing fee. In return they agree to hold the check for a period of time, usually two weeks, before they cash it. This gives the check writer time to have money deposited into his or her account whether by paycheck or by some other means.

Check advancing may sound like a good idea. However, the price can sometimes be high. Arizona allows deferred presentment services to charge a fee of up to 15 percent of the check value, with the maximum check value of $500. For instance, those who want $500 will be charged a deferred presentment service of $75 as a processing fee for advancing the money. If the lender takes the processing fee out up front, the check casher will only get $425 for the $500 check, and the lender will recoup his $75 processing fee when the check is actually cashed.

Be aware there are higher costs with check advancing from deferred presentment services. Arizona law allows only one deferred presentment service contract at one time. This means that an individual cannot seek cash advances from a number of deferred presentment service stores at the same time to cover bills. Those who are strapped for cash should visit Army Community Service financial counselors to discuss other alternatives before signing a deferred payment service contract.

Those with legal questions should call the Legal Assistance Office, 533.2009.




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