Is there some sort of technical reason why a checking account can’t just work the same way as credit cards do? Something mandated by law? A “service” that banks feel compelled to offer because people would just go to a competitor if they didn’t? Or another reason?
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Overdraft protection is optional everywhere I’ve ever banked. If you do not opt for them, exactly that happens, the charge is denied.
So the bank can make more money
You can turn off overdraft and your card will work just like you describe. You’ll get an insufficient funds message if you don’t have enough money when you try to use the card. Declining overdraft protection is the first thing I did when I got my first real adult bank account.
I think it’s a timing issue. You might seem to have enough money in your account at the time of the transaction, but not by the time the transaction is processed by both banks (both sides of the transaction), if you have other pending transactions.
Banks make billions a year off overdraft fees. That’s literally the only reason
No fees if the transaction is declined.
If you go overdrawn the bank makes money, hope that helps
You absolutely can opt out and your debit card will work exactly the way you described.
1) you can have them “turn off” overdraft if you want
2) people like it because it means you don’t have to worry about moving money into an account just to buy something right before you get paid or before you purchase something. Most adults have multiple accounts, some form of long term savings with better interest rates and a spending account, an overdraft let’s me owe a bank say $100 for a day or two if I went over what I budgeted for that week without having to mess about moving money between them. It’s a pure convenience factor that pretty much everyone likes having as a safety net even though most of us don’t touch it each month
3) reason for the bank? They make money off fees on using it + if they didn’t offer it yeah people would bank with companies that do
It’s usually a complete option they give you when you open a bank account.
One reason not mentioned is inertia from how paper checks work
I think they were originally conceived as – or at least somewhat reasonably promoted as – a kind of friendly service when you accidentally overspend. Remember, this was at least a decade before widespread smartphone use. You might not perfectly know your balance.
Definitely it’s become a fairly shameless way for banks to maximize profit, especially if they do bs like processing transactions in a specific order specifically to activate overdraft fees.
As a few people here have said, yes you can absolutely turn it off and have the debit card work exactly as you described.
I do want to clarify why overdraft fees exist, and why they’re a service that the bank offers to you (rather than just a way for them to make money). The idea is that, if you go to pay for something and don’t realize that you don’t actually have the money, the bank helps you by letting you spend money that you do not have. This might be helpful for you (it helps you avoid embarrassment when paying for dinner, or it stops your electricity from getting shut off, or avoids putting a missed payment on your credit report, etc). From the bank’s perspective though, you have no money and might never have money again (maybe you’re going to close the account and walk away!), so they’re doing you a service by letting you spend their money, because you do not have your own. In exchange, once you do have money again they collect a small fee for taking on that risk.
The ultimate answer to any and all of your questions is inevitably: money!
Banks enjoy you taking overdrafts as they tend to count as unapproved loans, so they have you by the short and curlies…
The reason overdraft exists is from before we used bank cards daily and before internet banking. They were to help people prevent bouncing cheques for a small amount.
When I was younger I made a small mistake in my chequebook and ended up bouncing a cheque for 11¢… an 11¢ that cost me extra money because I had to pay NSF fees to both the bank and the company I wrote Tue cheque to.
I’ve had overdraft ever since.
The overdraft protection is basically a very high interest line of credit. It can be helpful in an emergency such as not bouncing your house payment 3 days before payday, but it really is a last resort. Better to have savings that can be moved over for free.
Its really just a way to get more money out of you they make you think overdraft protection is a good deal when its not its a nice and legal scam because they aren’t "forcing" you to buy into their bullshit and it does do what they say it does (if they aren’t confident they can sell people on it they’ll make it the default that you have to opt out of and even then they’ll come up with all kinds of excuses to get you to change your mind) don’t you just love capitalism sometimes?
You can just set the parameters up to not have the charge go through.
I’ve never heard of an banking or credit union institution that didn’t have that feature with a few clicks
They make a fortune on overdraft fees 😝
Because then your bank can charge you for that little loan.
Their job is to make money.
It’s a holdover from before we had technology to do this.
If you’ve seen the film Catch Me if you Can, they actually discussed how pre-computer check processing worked, and work is involved. Checks were sent back and forth and all sorts of manual work was performed and because of that, overdraft fees reflected the work performed in a case of a failed check. People just spent days working on this transaction (maybe a minute per piece over 5 days, but still over time) and you just wasted the time of 2 banks and committed the crime of writing a false check that could not be covered by the money in your account.
Now as time has passed, the work disappeared but the fee remained. So now, you were getting charged $30 and you still had to somehow pay the debt … because a bounced check didn’t pay for shit.
And now there’s a conundrum … why would anyone continue to pay overdraft fees in a world where the work related to those fees was eliminated? So they created a service to justify that continued implementation of the fee. It became a form of micro-lending known as overdraft protection, and now instead of failing to pay the bill when you don’t have money, you get to pay a fee to cover the bill and go negative.
Overdrafts are optional. They are a line of credit you can chose to use. Many banks will automatically give you an overdraft unless you opt out, but you absolutely can opt out of them.
I Overdraft protection originated when more people used checks and stores would have high returned check fees. The overdraft fee charged by the bank was usually less than the store fee for a returned check, and was significantly easier to take care of.
Overdraft is optional everywhere. Depending on the bank they might have an opt out or opt in system.
Overdraft exists so that if you, say, accidentally overspend before pay day you still can buy stuff and then pay it back when you get your salary.
Ita a service you agreed to. I withdrew myself from that service and now I don’t get overdraft fees, my card just declines me.
These debit cards are after the paper checks we used to write instead. It’s still called a checking account. You could write amounts on them and send them to merchants and your landlord or whatever, pay at stores, put it in a birthday card to your nephew, and the bank would give them the money, and then you’d owe them that money plus a fee for every check you wrote that didn’t have sufficient funds.
Some people didn’t know and some people took the chance. Back in those olden times, the money from your pay was handed or mailed to you in a check which had to be physically deposited to a person, and the bank would process that money not even immediately. Your tenant writes you a check for $500 and you take that and a stack of other checks to your bank and the bank doesn’t give you that money immediately. They have to communicate with another bank (probably) and if that took up to a week, and they didn’t have enough money in their account, the bank might give it anyway and overdraft the check writer.
People had one monthly statement to see if the checks they wrote matched the amount they recorded by every check they wrote or deposited, and you had to account for checks that were outstanding, ie, not taken yet out of your funds.
Some people could cross their fingers when they have $1000 in the bank, that the mortgage check they wrote for $700 and the pile of utility bills amounting to$315, including whatever shopping or kids field trip, that deposits every week from a paycheck would keep up and not all end up on a day before the paycheck cleared and bounce.
Part 2: modern times but not current times:
Debit cards also used to take as long as a written check sometimes, and direct deposit wasn’t yet a common option. Using your card assumes you have the funds. POS wasn’t sophisticated enough to decline your card, so you just bounced a stack of debits because you had to buy a soda, because you don’t keep track and smartphones and banking apps weren’t invented yet so to get an available balance, you had to call the 800 number for your bank on the back of your debit card and go through the menu.
Maybe your paycheck clears tonight, but they will take the debits first, biggest to smallest, and charge overdraft fee for your soda, like $35, hope it was delicious, and then put your deposit in.
So current times, if you want that soda and you checked your app and you have 15 cents until tomorrow, the overdraft protection will keep it from wrecking your life. It’s better if you can just wait for tomorrow. Optionally, you don’t get overdraft protection and the store declines your card. But say it’s not soda, it’s a gallon of gas. You might want to keep the overdraft protection instead of having to walk home and pay to get your car out of the impound lot for abandoning it on the side of the road.
As others have explained, an overdraft is basically just a loan the bank is giving you, and is thus a useful service. It’s interesting how the right pretends to be all about Christianity but is unwilling to call high overdraft fees what they are: usurious interest.
Greed
It exists because banks make money from overdrafts.
We used to have Visa Electron cards that checked the balance every time. They were discontinued, and now having only Visa Debit which is not realtime.
Why cut themselves off from a way to make money? You can opt out of it but they make a lot of money from people who don’t, so why stop?
technically, when you’re in over draft, you’re borrowing money from the bank. So you have a small loan, loans have interest.
Credit cards, have a specific amount they loan you a month interest free.
That is how my debit card works
In the simplist terms, that’s how banks make their money. You can opt out of it and the card will decline. There are exceptions like subscriptions or a server error that may still incur charges but it’ll decline at a till or online
I can answer that question. For money.
You can change that
I work with banks. It’s basically a short-term loan at a stupid interest rate. It’s so the banks can make money.
That said, you can opt out of that. Your card will just be declined if you don’t have enough funds.
Most likely, if your bank is reputable, you have to opt in for overdraft coverage. The practice for overdraft was deemed predatory. The fee was limited in 2024.
I had overdraft protection until 2017. Then when I changed banks I told them that in no uncertain terms that I did not want any overdraft on my Visa Debit card. $0 is $0.
Capital One is my favorite for this reason. $0 overdraft fees (including ATM withdrawals), and even an option to completely decline overdrafts.
They exist to generate fees for the bank, as many people are irresponsible / bad with math, and the banks found a way to monetize it.
They thing I’ve never understood is why they say overdraft fees are up in the millions or billions. Is it that common to not check your account balance before making a transaction?
It’s so you don’t bounce a check. Bouncing a check is more expensive than the $35 overdraft fee. Since bouncing a check is technically check fraud, the overdraft protection is there as an insurance policy to avoid accidently commiting a crime.
It’s a bit outdated now, though. But it still exists for the same function. If you don’t ever write checks, you could and probably should just turn it off.
An alternative that my credit union offers is called a sweep. My savings is connected to my checking and instead of a $35 overdraft fee that I would then have to go in and correct, it’s a $5 fee and they automatically move the money from savings to cover the purchase, which is what I’d do anyway.
So that the bank can charge you an additional fee, why else??
This is a major source of profit for banks.
Edited to add— it used to be a bigger source of profit, as overdraft fees would really add up. I paid $70 because I overdrew my account by $2 (I’d been paid, but the paycheck hasn’t cleared yet).
The law changed limiting those fees, but that law is about to be overturned.
Because bouncing a cheque is expensive. We didn’t always have debit cards so we had to keep track of our outgoing and income cheques and no one is perfect. When you bounced a cheque you have to pay insufficient funds fee to the bank and a penalty to the people you wrote the cheque too.
Maybe the post dates cheque you wrote to the power company was cashed too early so the money you thought was in the account is gone? Or the pay cheque you deposited hasn’t cleared yet? Or the cheque from the person you sold your car to bounced? There are a lot of reasons overdraft protection is helpful.
Nope, it’s 100% income driven hidden behind being helpful.
The justification is that it’s a service so that important bills get paid instead of declined or NSF (think rent, loan payments, etc.). However – many banks structure the transactions to pay them in order of amount. For example – let’s say you have rent process for $1500, groceries for $150, gas for $50, and takeout for $20 on the same day. You needed $1720 to cover those transactions, but only had $1500 in the account. You have enough to easily cover the 3 smaller transactions, but not all 4. However – the bank will process the large rent payment first, and then process the other transactions from largest to smallest, causing three overdraft fees instead of (if they’d processed from smallest to largest). If your overdraft fees are $35 each, that’s an extra $70 you’re out. Those fees add up for the bank.
They do!
My card declines if there’s not enough money
So you can be charged more fees. More fees equal more profit
Very easy way for the bank to get free money. You can opt out of this . But it means if you are always right on the edge, that the card will be declined
The banks have collected 5.8 billion in those fees last year. That’s down from 12 billion in 2019. New laws were passed to limit these fees. But still 5.8 billion is the answer to you’re question.
Because money? Predatory practices on the poorest.
Banks make a ton of money on overdraft charges. Back in olden days banks would cover overdrafts for good customers as a courtesy.
They do that to charge exorbitant fees.
At my bank you can turn that on or off.
Mine is turned off.
Imagine you were out somewhere and had an emergency, and for whatever reason, you had less money than anticipated.
Would you rather overdraft to handle the immediate emergency NOW and pay it back with fees later?
Or just be shit outta luck?
Exactly.
The bank will get their money back, plus more with overdraft, and it allows you to handle what you need to. Everyone wins. Now, its different if we are discussing routine fiscal irresponsibility.
I have opted out of overdraft protection in my bank account.
I had overdraft protection on a bank account in my twenties. Got into one of those sign up over the phone magazine things that I tried to cancel, but they kept charging me. When I contacted my bank they wanted $25 to block each transaction when the transaction was only $19.99. so I removed my money from that bank account and put it in my credit union. They let that account overdraw $900 before closing it.
I prefer that the bank just not allow me to purchase things with money I don’t have. Not that I’ve been close to overdraft anytime recently.
It’s cause they make millions of dollars a year on overdraft charges. It’s a business
It’s not a substitute for income, just like spending on credit cards and not repaying immediately is dumb.
Where I live anybody < 18yo by law has a limit of € 0.
If you’re >18yo then it depends on your income if and how much of a limit you can have.
The limit is handy, it means transactions can go forward if you’ve miscalculated or forgot a certain payment and have gone below 0 accidentally. Especially for paying your taxes as paying these late often means getting a fine.
It makes banks money. It’s that simple.
Because a few years ago (I forget the specific year, but maybe 2019 or 2022), Bank of America made 30 billion dollars in overdraft fees. In just that year. Typical overdraft fees are $35, or if you are in their overdraft protection and had the money in savings, they would transfer the money for you and only charge $12.
I am a customer. Those are the fees I paid. There was still a limit on how far over what you had that they would cover. I don’t know the specific value but I think it was maybe $100. Because sometimes when I didn’t have the money in savings, they still accepted the transaction. It might have been because I had direct deposit, so they knew they had first dibs on my money.
They aren’t going to change a money making system unless they are forced to. I believe they have been sued a couple of times about how they calculated your available balance and what order they process your transactions in to force them to make it easier to avoid overdraft. I remember getting a class action suit payment of around $120 one year.
let’s say you write two $100 checks today
they both are presented to your bank Monday. your account only has $150 in it. your bank will either have to return one of those checks unpaid (which gets unpleasant for everyone), or pay both checks and run your account negative.
Banks couldn’t charge you overdraft fees if you weren’t allowed to overdraft, now could they. /s
I actually think it’s likely a hold over from the pre electronic days of banking.
I opted out with my debit card.
In most of Europe you are not allowed unasked for credit, so if you have a debit card and try to spend more than you have in the account it will be declined. Of course if you have applied for (and got) an overdraft it will be honoured up to the limit.
Because the banks make like, a couple of billion dollars a year on overdraft fees
I am okay with overdraft because sometimes I don’t earn enough to cover things like my car payment and other bills, but my loan for my car won’t default, so I can just scrounge until I’m paid to replenish the overdraft.
It’s not for debit transactions. It’s for ACH transactions. It’s the system created to process checks.
A lot of "online bill pay" and similar use ACH behind the scenes. ACH doesn’t process the transaction when you click "submit". Instead, it gets reconciled in one big batch overnight, because back when ACH was created they couldn’t do instant transactions.
If you have $100 in your bank account, and then tell 3 different companies to take $60 out of your account via ACH, they won’t know you don’t have the money until the batch runs.
At that point, the bank can either say "no" to two of the transactions. Or they can let them go through and charge you a fee for loaning you $80.
The second option makes banks more money.
Most banks will allow you to opt out of overdraft fees but some people might want to keep them on for emergency situations such as middle of nowhere gas purchases
Banks want your money.
just another way to take you money.
There is a technological reason for it:
Banks operate on a batch-processing system, where payments and purchases are aggregated and ‘posted’ to the account in ‘batches’ rather than real-time.
Also, the system is still configured to accept the cashing and writing of paper checks.
Finally, some transactions (like pumping gasoline) validate that the card is ‘active’ with a small transaction at the start, and then later ‘adjust’ the final amount to be what you actually bought.
This means that the bank does not know exactly how much money is really ‘in’ your account instantaneously, such that they could 100% of the time decline a transaction that would overdraw.
Banks don’t like being in the business of giving out free unsecured loans, and if they did ‘that’ they would lose a lot of money to people who would just never repay them…
To address this, your account user-agreement specifies that if you spend more than you have, you have to pay the bank back plus a penalty fee.
They want money from fines, that’s the bottom line. Check the terms for any card or bank account you open.
My debit card just declines if I don’t have money available. Basically, it’s a trap to keep poor people poor by extracting maximum money from them.
Just another tool in the toolkit to keep poor people poor and rich people getting richer.
In some countries that’s the default (at least in Romania it is). If you attempt to pay and you don’t have enough funds, it will reject your transaction
Straight up scam to steal money from you, and Congress refused to address it for over a decade.
Just to steal money from people who live paycheck to paycheck. Banks even calculate your overdrafts for the day in the order that will give you the most overdrafts for the day. So if you have $50 in account, you make three $10 purchases at beginning of day, and made a $80 purchase at end of day, they process the $80 first and 3 $10 purchases after, hit you with 4 $50 overdraft fees for a $200 hut.
It’s really the bank hitting you with a predatory 50000% short term low they can take out of your checking, but they shamelessly claim they’re doing you a service, while literally making BILLIONS in overdraft “service” fees.
It’s a subject near and dear to my heart because I first learned about them in the late 90s when because Fry’s electronics double charged be for a computer, then delayed a refund on my card, I ended up with $250+ in overdraft fees… despite the fact that if they ordered my purchases and deposits correctly, I would have never have overdrafted at all. The overdrafts they slammed on me with by changing form chronological order of purchases to highest to lowest, actually created all the overdraft. I had to take it up all the way to she central BB&T office, ignoring their first offer to just “split the difference” on their theft. Luckily I’m affluent and threatened to take my assets elsewhere and raise a huge stink with the news (it was before overdraft fees outrages had hit the national news) and they fixed all of it for me.
I’m still seething knowing that people who live paycheck to paycheck still get f***ed by this despite Congress stepping in a decade ago for reform.
It is RACKETEERING.
https://www.library.hbs.edu/working-knowledge/are-banks-the-bad-guys-overdraft-fees-are-crushing-low-income-customers
Greed
Try to join a credit union.
Because banks rake in a shitload of cash
even better why don’t they auto take from your savings account. I used to have a bank that did something like this without insane fees.
It’s basically a loan, and they are optional.
It’s so banks can rip you off.
If you don’t have money, it will decline. BUT, if you make a purchase with your debit card – let’s say you buy lunch and then you have a transaction outstanding that posts in overnight processing – like a check or ACH transaction or card purchase that wasn’t showing pending anymore but came through for processing, they will all likely still clear your account because they were authorized before you didn’t have enough money. Anything authorized when you had funds will clear the account. Either way – I guess the moral of the story is to keep track of your money when you spend it. However, you are also within right to call the bank and ask for a refund of your fees if you get them…or look for a bank that doesn’t charge them. Just a reminder that banks are a for profit organizations so it’s best to shop around for one that works best for you.
Experience – 25 years in consumer banking
Some banks have a threshold of how much an account can be overdrawn before a debit is denied. Those banks can set different thresholds for different customers based on all kinds of factors (other accounts you have at the bank, total dollars you have in other deposit accounts, investment, or CD accounts). Basically, if you’re a “good customer” your account may be coded to allow for overdrafts to occur.
If a good customer who has never been overdrawn has a debit that overdraws the account by $10, they may pay it. Same goes for checks that are presented. The bank may pay the check instead of returning it if the customer is good.
Each bank has different policies for handling overdrafts and different policies within a bank for different customers.
If you think about it, a bank who allows an account to be overdrawn is essentially giving the customer a small loan. The overdraft charge is the “fee” for it.
Source: have worked in banking (and IT for banking) for over 30 years.
Because banking is still run as a 1860’s institution.
For all the technology, there is still no positive notification of settlement. The only feedback a bank will receive is "This payment hasn’t bounced yet" or "This payment has bounced"
For most applications, going into a negative balance for a small amount just helps everything run smoother.
The problem being that bankers are greedy little f***ers who will slap you with a $20 charge for the favour.
My bank refuse to give me an overdraft, so my debit card does exactly this
Overdrafts allow the bank to honor your check instead of sending your check back unpaid. Same with a debit card. You will be charged a fee for this courtesy. As others have said, you can arrange with the bank to not allow overdrafts.
I don’t know if is the same now, but when I lived in England in the 1980s, it was customary to keep your checking account in an overdraft condition, paying it off from time to time. Very similar to the way I use a credit card, building up the balance owed during the month and paying it off when I get the monthly bill.
So the bank can charge you a $30 fee when you overdraft.
Overdraft is just credit.
And depending on where you live, debit cards have zero credit unless you request some and you’re approved. And then it’s in effect a bank-specific credit card, instead of one issued by a credit card company. Although they’ll usually have some sort of connection with VISA/Mastercard or other international payment network.
So they can charge you more fees.
But then how would they take even more money from people who clearly don’t have any? Duh.
I think that is an American thing, because where I live transactions simply get rejected if there aren’t enough funds.
Banks make billions in fees off overdraft charges each year
The bank will say it’s to protect you from getting stranded or something. Pretty sure most banks will allow you to turn off overdraft protection, you just have to tell them to do it.
In reality it’s so they can make a bunch of money off people’s mistakes
Eating a $15 fee but having my rent paid is better than no fee and possible eviction.
I recommend using credit cards for purchases then pay the full balance at the end of the month. My bank activity only ever sees my credit cards payments. Plus you get cash back on the stuff you’re already buying
Because it makes the bank more money.
Because there is money to be made, much money.
They decline and you haven’t performed the transaction. They can’t charge overdraft if you don’t do the transaction. Overdrafts were around before debit, we had them on physical checks too.
At the banks I’ve used they let you choose.
You can. You have to call your bank to make it so and stress that if your account does not hold the fund, then you do not want them to cover the charge. Also, banks make money from those overdraft fees, so it’s in their best interest that you aren’t paying attention and they can make money off of you.
Because "American exceptionalism" means most things in the United States are ass backwards relative to the rest of the developed world.
That’s the default here in the Netherlands. If you want to be able to overdraft you have to turn it on.
No, it’s so the Bank can make more money, and that helps the C suites to buy many more yachts.
Over-drafting and they keep charging 35-40 dollars a pop until the accountholder is too far in the hole to bail themselves out and the Bank closes the account and reports it as bad debt thus, leaving the person to buy money orders, envelopes, and stamps to pay bills.
I see it happen to my clients every day. It costs way more money to be poor.
I’ve seen a bigger issue with ACH transactions, like monthly subscriptions. The card isn’t swiped so there’s nothing to decline. A Chase rep told me once it was "customer service," which is bullshit. Chase makes billions in overdraft fees. I’d much rather deal with a vendor than give them $35.
There are massive profits to be made from interest charges on these types of overdraft loans. You are not even notified, and I just saw the statement from my bank that told me they are not obligated to notify me, when the overdraft is used. They just charge the very high interest. You have to opt out of ‘overdraft protection’ and it is not easy to do.
It’s very lucrative for them. Why else?
You dont have to have an overdraft. I dont have one as have never needed one.
I just want to point out in response to all of the "overdraft fees have to be opted into" posts. That didn’t actually used to be the case in the US, until legislation capping outrageous fees from card institutions was implemented. I don’t recall if it was attached to the same legislation or if it was separate (was changed around the same time either way), but the default at one time was very much not opting in, overdraft protection was active by default. I lived through those times… It was essentially turned on by default, and once you got screwed for the first time then you knew to turn it off. Later it was legislated that you had to consent.
Now the reason why I mention that is because fee caps have been eliminated, the CFPB was eliminated, etc. So you can bet that while there are plenty of snarky "you have to opt in, get a better bank" answers… Not for very damn long lol. Even if they never get rid of the current "you have to opt in" state and bring it all straight back to 2005 (or whenever)… They most certainly will create new fees that accomplish the same thing as overdraft being on by default. Just give em some time to get "creative" again (and remember to thank MAGA when it happens of course).
It’s so the bank can make more money off you. That’s why you have to “opt out” of most overdraft programs instead of “opt in”, most people don’t opt out because of the extra step/not knowing you can so the bank makes more money off you when you overdraft
They exist because banks make money from overdraft fees.
Because sometimes people have unexpected expenses and need extra money before they get paid their monthly salary.
Short answer, so banks can make more money by taking advantage of the ill informed and the desperate.
It’s a relic of the chequing system that we used to use, people would write cheques to make payments and if the money happened to come in and out in such an order that one cheque would bounce, sometimes it was better for the bank to make a record of temporary debt, but charge the customer a fee to represent short term interest costs, which would save the consumer having to negotiate when each cheque recipient could try and cash in their cheques.
Now with a card they extend the same facility to reduce the instances where your card is declined, but obviously with the intention of earning an overdraft fee when they normally wouldn’t.
You can ask the bank not to offer such a facility, and to decline any transactions if your account doesn’t contain the required funds.
Because banks approximately $6bn a year in overdraft fees and because it’s mostly for people living paycheck to paycheck, it generally creates a recurring negative balance that they can continually generate fees off of. It’s essentially a legalized predatory lending scheme & is very similar to payday loans.