Debt Reduction

Direct Deposit Advance: My Dirty Debt Secret

I wondered when this moment would come. The moment where I’d have to fess up my dirty little secret that is my biggest stumbling block in reducing my debt.

I’ve made no bones about it – my biggest obstacle when it comes to reducing my bad debt is no one other than me, myself and my crappy banking skills. I would like to tell you that the chaotic mess my financial state is in could be attributed to a perfect storm of things – wedding planning, house-related expenses, etc. But my downfall is a common one: I just spend more than I make.

How do I accomplish this without a credit card or incurring a ton of overdraft charges from my bank (although to be honest, I’ve had a couple of those as well.)? Readers, let me introduce you to my partner in crime: Direct Deposit Advance. I don’t know when the banks invented this tool but surely I’m not the only schmuck to have been seduced by its charms.

For those of you who aren’t familiar with the concept, direct deposit advance will allow you to “borrow” money from your future direct deposited funds. It will later deduct the amount that you “borrowed” the next time an amount is direct deposited into your account. It’s a great idea in theory, but you’re not going to get something for nothing. That “something” for an advance is $2 for every $20 that’s advanced. So if I advance $500 from my next paycheck, that amount will be taken out of that paycheck PLUS a $50 fee.

I’ll be honest – the advance has come in handy a time or two. I don’t have an emergency fund, so that one time when my brakes went all wonky on the RDT (that’s “Rattling Death Trap” to regular readers of this blog) and I didn’t have immediate funds to address the situation, I advanced the money from my next paycheck. But what about July’s vacation when I just had to buy that bottle of wine from that Door County vineyard? (Okay, two bottles of wine.) Of $20 extra dollars here to scratch my itch for Chinese takeout.

Direct Deposit Advance has been a great partner-in-crime (yes, friends, that’s sarcasm). There have been too many times that I’ve advanced funds from my next paycheck when I should have just sucked it up and went without for a bit. Even the times when I “needed” to advance money for things like groceries and gas, I was short because I had already taken $300 or $400 from my check. And I could weep to think of the credit card payments I could have made with the fees I paid for this “convenience.”

I give credit to the banks – after you’ve advanced from a certain number of paychecks (12 is the magic number, I think – I only hit that number once), they start cutting you off. The $500 that you advanced from the last paycheck is reduced to $400 and so on. But if you go cold turkey just once, you’ll be able to start the vicious cycle all over again.

As a veteran of the cycle, I’ll tell you first hand that it seems to take a windfall of enormous proportions to dig yourself out of the advance hole. I was able to recently get out of the (rather large) financial hole I had dug for myself after too many months of direct deposit advance, but that was only because my current employer owed me $1,000 in back pay after a late review and raise. That also helped me to pay off some other bills that had stacked up over the past few months.

I’ll be honest – I’ve been lured by the “security” of direct deposit advance and I’ve been a smoker. I can kick both habits, but I have a pack of Camel Lights in my car “in case of emergency” and no emergency fund. I can’t promise you that the next time I have a bad day at work that I’m not going to run out to the Rattling Death Trap and light up. I also can’t promise that I’ll never advance from my next paycheck. But I promise to try …

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4 thoughts on “Direct Deposit Advance: My Dirty Debt Secret

  1. Wow – I had never heard of Direct Deposit Advance…and I’m kinda glad that I haven’t. That’s WAY too easy.

  2. Uh-oh.
    It’s bad enough my account will let me go up to $500 overlimit before returning things. When evern I need motivation – I pull up all of my bank fees for the past year. Even one is too much. Makes me sick that I just GAVE that money.

  3. It’s not just that you should not have done things like buy that wine. You need to reframe your thinking so that you do not even do things like go on vacation when you have no money in the bank. Vacation was spending money in order to spend money that you don’t have so that you could pay 10% and thereby not have the money to pay down the credit cards either. What a downward spiral.

  4. Not that I’m advocating using this, but I have something called “overdraft” protection, which basically just charges you the going interest rate to cover whatever you overdrafted from your checking account – up to $2000. The last time it happened to me (I forgot to transfer money from another account), it cost me $1.82 for 10 days to borrow $500 (I finally noticed and paid it off). Much better than $2/$20!

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