What is direct deposit cash advance?
A direct deposit cash advance is a short term loan taken out against a future paycheck. It is similar to a regular cash advance, in which a cash advance agency, after verifying your income, agrees to loan you money up to a certain limit. (This type of short term loan is also known as a payday loan.) With a regular cash advance, this money is given to you immediately in cash by the agency teller. By contrast, a direct deposit cash advance is sent to your bank account through the Automated Clearinghouse (ACH), and is credited within two to three business days.
The amount of the loan, plus interest, is repaid anywhere from 7 days to six weeks into the future through a debit transaction against your banking account. If the funds are not available when the loan comes due, the cash advance agency is legally entitled to pursue you for the full amount of the loan, plus any convenience and legal fees spelled out in your cash advance contract.
Direct deposit cash advances offer the benefit of convenience, as they can be initiated over the Internet. The downside is that it will take a few days longer to receive your money.
Consumers should be cautious when using any cash advance service. Payday loan providers generate their profits by charging large interest rates: depending on the term of the loan, rates can range from 100% APR up to 900%. Such rates are seen as usury by some politicians and most consumer activists, who argue that it is easy for the poor to become trapped in a vicious cycle of escalating payday loans.
Cash advance lending in any form is banned outright in 15 states in the United States, and heavily regulated in others. United States Federal law caps interest rates for active military personnel at 36%.
From time to time, some people run out of money long before they run out of bills to pay. In such a case, a person may need fast access to extra cash to purchase groceries, buy gas, get car repairs, or pay a utility bill before his next paycheck arrives. In such a case, he may turn to a company that provides direct deposit cash advances. A direct deposit cash advance is a type of short-term loan. It allows a person to borrow money, usually for about seven days to four weeks. When a borrower is approved for this type of loan, the money is automatically deposited into either his checking or savings account. This means there is no loan check to wait for in the mail. The borrowed money is automatically deposited into the borrower’s account on the date agreed upon, which is often as little as 24 hours after the loan is approved. Typically, a direct deposit cash advance requires the borrower to allow the lending company to access his bank account again when the time comes to repay the loan.
