Many do it every month. They turn to payday loans to carry them through until that check comes. In fact, according to statistics about 5.5 percent of US adults spend $7.4 billion annually at payday lenders. And, the majority are African Americans; 12 percent of African-Americans have taken out payday loans, more than twice the figure for whites, reports U.S. News & World Report.
Consumer groups have warned against using these loans because of the high interest rates. Now comes another warning — stay way from applying for a payday loan online.
As the L.A. Times reports, many are being tricked into doing so. Envelopes containing what appears to be a pre-approved credit card arrives in the mail. The accompanying letter instructs people to go online in order to receive up to $500 in your bank account. In actuality it is a payday loan. Internet payday loans are even more deadly to consumers financially. The interest rates on average are higher.
According to the Consumer Federation of America (CFA) Internet payday loan sites, where loans due by the next payday, can cost up to $30 per $100 borrowed and borrowers typically face annual interest rates (APRs) of 650 percent.
Most often, users don’t realize just how much interest they will have to pay. “Only 38 sites disclosed the annual interest rates for loans prior to customers completing the application process, while 57 sites quoted the finance charge. The most frequently posted APR was 652%, followed by 780%,” states the site.
The loan plus the interest will be automatically withdrawn from your bank account on your next payday.
This process is also a way to get people to disclose sensitive financial information over the Internet. Applications will ask for bank account numbers, Social Security numbers and employer information. The CFA advises consumers never to transmit bank account numbers, Social Security numbers or other personal financial information via the Internet or by fax to unknown companies.
And we say steer clear of payday loans all together.