This totally depends on your payment preference. An Automated Clearing House (ACH) authorization is a payment authorization that allows your payday lender to electronically debit your prepaid card, bank or credit union accounts to service your debt.
Some payday lenders ask loan applicants to provide ACH authorization during the loan application process. If you approve, the lender automatically debits the provided account to service your debt. You may revoke it later if your preference changes.
Advantages of ACH Payments
- Processing cost is lesser than those of checks and credit cards
- It is convenient for customers
- There is less frequent payment failure.
Downsides of ACH Authorization
- Payments cannot be processed on weekends
- Penalty fees for failed payments
- Slower processing times compared to other payment methods.
Comparing the advantages with disadvantages can help you make an informed decision on what's best for you at this time.
Other Ways to Pay Back a Payday Loan
ACH authorization isn't the only permissible payment method. A borrower may also choose to pay back their payday loan in person at the storefront or give the creditor a postdated check they can cash. Under federal law, lenders are not allowed to make ACH authorization a loan eligibility requirement for any borrower.
Read Your Payday Loan Contract Carefully
You could be agreeing to an ACH authorization without knowing it. That is why it is important to carefully read through your payday loan documents before signing them. Pay special attention to the promissory notes and clauses on repayment.
Before agreeing to an ACH authorization, ensure that the loan documents clearly state how these automatic debits can be revoked or stopped. Borrowers are advised to pass on loan offers whose contractual documents do not contain instructions on how to revoke an ACH authorization.
If you already signed one without these instructions, you can still revoke the authorization by contacting your payday lender, bank or both. Here's a detailed guide on how to revoke an ACH authorization.
What Else You Should Know About Payday Loan Fees
You could also ask the lender how much you should expect to be deducted from your account, whether it's a rollover fee or the full amount and when the withdrawal may happen. Knowing these should help you plan your finances better.
Borrowers are advised to take out only what they can afford to repay in time. Missing payment deadlines can have a negative impact on your credit ratings, trigger a rollover, or earn you a late payment fee, amongst other things.
Your bank or credit union may also charge you a bounced check, overdraft or non-sufficient funds fee for failed debits, that is, if your account doesn't have enough funds at the time an electronic debit is attempted.