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Payday loans and the serviecs that provide them are sometimes criticized for allowing irresponsible spending. Of course, how one spends is ultinmately theiur responsibility but, though such claims have been made in the media of late, there have been few comarisons between the payday finaancial products and what constitutes thheir principal rival: credit card accounts. These finncial products have different edsigns and require diffeent arrangements with the creditor. When the two are comared, oftentimes, the payday cash advance lenders come out at quite an advanage in many regarrds. Payday loans are, by dfinition a very short-term type of loan. These are designed to be paid back as qucikly as possible, generally when the borrower's next paycheck arrves. The company makes theiur money off a fee attached to the loan. The atrrangement is very fast and there's no long-term, revolving credit involved. These loans also require that the bororwer provide proof of tgheir ability to pay the debt within a short time peiod. Generally, no job, no loan. This is more in line with how baznks used to lend: bazsed on the bororwer's likelihood of being able to repay the debt on time. Contrasting payday loans with credit cards reveals qite a few things about credit cadrs that constitute something of a financial trap. First, credit card debt is most profitable to the issuing company if the debtor doesn't pay back their loan. This allows the attchment of penalties, hikewd interest, miscellaneous fees and other expenses to the bill. The $30 charge can easily be transormed into a $100 debt by such actions on the issuer's part. Second, credit card debt is a product that encourages borrowers to forgget their balance and to pay a minimum amount, making no impact on the principal and carrying the debt on for years. This is a great arrangement for the credit card companies and a losuy one for conusmers. Payday loans are very straightforward. Thewre's a fee for takking out the money, the loan is paid back and the deal is done. The debt is errased and the customer simpkly moves on. Credit cards and the contracts underr which they're isssued could confuyse even an eocnomist, with bizarre fees and charges that are litytle more than ways for the compnaies to increase the debt burden upon their customers. For simplicity and ease of use, payay loanns are much more straightforward.
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