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How much more expensive is a payday loan than other credit?

Short-term: Expensive. Long-term: Very, very expensive.

If you pay back your payday loan almost immediately, the fees you will pay are only "high." But, payday loan fees become very expensive if you don't pay your loan back right away. This is especially true when compared to other forms of credit--like a bank loan or credit card.

If you keep paying fees over three months but don't pay back the loan, we estimate that payday loans are at least nine times more expensive than a high-interest credit card and about fourteen times more expensive than the average bank loan.

Take a look at the table below for a direct comparison between sample payday loan and credit card fees.

Fees comparison on $300, credit card and payday loan, shown over twelve weeks
    Week 2 Week 4 Week 6 Week 8 Week 10 Week 12   Total
High-Interest Credit Card Fees     $20   $20   $20   $60
Payday Loan Fees   $90 $90 $90 $90 $90 $90   $540
(1) The "high interest credit card" is assumed to have a monthly minimum payment of $20. Gaps in the table above (weeks 2, 6, and 10) reflect a monthly billing cycle. In this example it is assumed that the credit card only has $300 on it.
(2) The sample payday loan amount is $300, with fees of $30 per $100 loaned (totaling $90). At Week 12 you would still own the original loan amount of $300.

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