When you write that payday loan check, you know that there isn’t money in your account to cover it. That’s the whole premise of the payday loan: you make a promise to pay the loan amount plus a fee at a later date in exchange for some cash today. It’s not like writing a “bad” check, because you have a written agreement with the payday loan company about when that check will be deposited.
Unfortunately, there is still the possibility that the check could bounce. If you don’t have enough money in your checking account on the day that the payday loan business is going to cash the check, it could bounce.
Now, you need to fully understand what that entails. When a check bounces, you’re going to be charged some fees. You’re going to be charged anywhere from about $20 to $35 by your bank. Most banks tend to gravitate toward the higher end of that range, of course.
In addition, you’re going to be charged a fee by the payday lender for the bounced check. That fee is above and beyond the payday loan fee. That fee is regulated by state law, but usually maxes out at about $35.
Now, where things can really get screwy is that a check can be again presented to your bank for payment by the payday lender. When the lender presents that check again, you will be charged a fee again by your bank. The maximum number of times this can usually happen is a total of 3 times.
So, let’s say you borrow $200 from a payday lender. You write a check for $230 to cover the fee. If you don’t have money in your checking account, you could be looking at a total of $30 for the fee, $35 for the returned check fee from the payday lender, and up to three charges each of $35 from your bank. That’s a total of $170 in fees and charges, just to borrow $200.
The bottom line here is that bouncing your payday loan check is never a good idea. If you aren’t going to be able to cover the check, you should talk to the payday lender. Having to renew the loan and paying another loan fee is far better than paying the returned check fees.