Cash Advances: The Dirty Little Secret of the Underpaid and Overspent
The time period spanning from early 1998 through late 1999 was easily the worst just-over-a-year of my life for a variety of reasons, not all of them financial. I was working as a teacher for a small private school in San Diego, and was grossly underpaid for what was easily the most difficult job I have ever tried: “teaching” 6th graders. I use scare quotes because, in my experience, teaching comprises an extremely small portion of what you do whilst dealing with 6th graders: mostly, it is wrangling, breaking-up-of-fights, consoling, hand-wringing, hair-pulling-out, why-me-God asking. But that is a story for another day.
In exchange for performing this horrific job, I was paid just a little over a thousand dollars a month, which is a small salary anywhere, I believe, even in 1998-1999, even for a teacher, but especially in California. I was paying an insane portion of my “salary” in rent (somewhere near 50%), and had a part time job to make up the difference, more or less, in my expenditures. This was long before I started using a zero-based budget or had heard of Dave Ramsey. The only saving grace for the situation was that my credit limit was very low: I had only one card, and it had a $500 limit on it, so even if it was maxed out (as it usually was), I could not get myself into much more hot water with debt.
Or could I?
That whole year, I would inevitably find myself with bills to pay a week before the next paycheck was coming. I had no emergency fund, I had no plan whatsoever to deal with any aspect of my life (more on that some other time), but I have never been a late bill-payer (something about always needing to please, I think). Luckily (?) for me, Wells Fargo had just introduced its cash advance program for its customers who used direct deposit. Using this program, I could use $500 of my soon-to-be paycheck ahead of time for a small fee. Awesome! All I had to do was agree to paying $20 for every $100 I advanced, which seemed like a lot even at the time, but hey–I wasn’t running up a balance, and everything would be paid off next week. It wasn’t like real debt, right? It wouldn’t follow me around for years to come.
So I used the cash advance feature. A lot. Like, pretty much all the time. In effect, I borrowed money for what is equivalent to 240% APR for over a year, more or less every month, just so I could pay my stupid bills on time. Now, I could have taken a few extra hours and saved up a slush fund, or an emergency fund, to cover this overdraft issue. Or, I could have talked to my creditors and asked that the bill payments be due after my paycheck came in (yes, you can do that!), but instead, I did what many people do and borrowed money at usurous rates rather than looking at my finances head-on and looking for other alternatives.
Most people have a general idea that those check-cashing/cash advance places are a rip-off. And maybe this keeps some people from using them. But not everyone is as suspicious when the lending predator is somebody like Wells Fargo. So, I beg of you, don’t do this–don’t engage in behavior that will keep you poor even longer–never take a cash advance, and always be on the lookout for alternatives to debt, regardless of the form in which it presents itself.