Credit Information

I didn't think it was possible. But it is. Folks, there is something worse out there than putting everyday expenses on a credit card, then carrying the balance. The guys I'm going to tell you about make the credit card people look downright benevolent. Meet your smiling neighborhood cash advance parlor.

These legal loan sharks go by names like EZ Money, Cash 'N Go, Red E Cash, Cash in a Flash, the Money Tree, and others.

Here's how it works. You want cash now. Payday isn't for another two weeks. So you head on down to the loan shop. Just show them your driver's license, bank statement and pay stub. Write a check dated two weeks from now for, say, $200. A minute later, you're back on the street, $170 making a comforting bulge in your wallet. Two weeks later, the loan shop deposits your check. Pretty cool, huh?

What's that? You say your check was for $200, not $170? Do you recall when they mentioned a "small convenience fee"? That's the missing $30.

What would you say if I told you that "small convenience fee" amounted to an annual interest rate of 416%?

How do these lenders get away with rates this high when the credit card companies are limited to 24% or less (cry me a river)? Because, technically, you don't pay any interest. Just that flat fee.

So what are the alternatives? Just try going into a bank and asking to borrow a couple hundred for a few days. I can still hear the loan officer giggling. Not a pretty sound.

One great alternative goes by many names. My bank calls it "Ready Reserve." It's a revolving line of credit tied to my checking account. If I write a check for more than my account balance, good ol' Ready Reserve transfers in money to cover the check. Next payday, I cover the reserve by telling the bank to apply part of my deposit to the reserve account. There's a small annual fee (around $10), plus credit card rates are applied to any standing balances.

If your need for cash is truly occasional, for unforeseen emergencies (are there foreseen emergencies?), try being your own quickie lender. Hold a garage sale, auction off some stuff, or take on part-time or temporary work in order to put a few hundred dollars in a war chest. Take the cash and buy traveler's checks. Put them away; just don't forget where. When you need the money, write out a check, put it in your stash, and take out the traveler's checks. Next payday, buy more traveler's checks and "redeem" your check. If you don't do it this way, most of you won't pay back the stash.

(Note: Some traveler's checks expire. Make sure you redeem them for new checks before the expiration date.)

If you find yourself short of money month after month, you need to make more money. Taking a $200 cash advance 10 times a year will cost you $300 a year or more.

John McCabe's Web Guides show you how to find more and better success in all facets of your life.

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