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Wells Fargo Direct Deposit Advance: Borrower Beware

Updated on July 4, 2011

Wells Fargo Direct Deposit Advance

If I could plant one thought into the mind of anyone thinking about utilizing the Wells Fargo Direct Deposit Advance service, it would be this: Borrower Beware. I remember when I first found out about the service, ironically enough at a time when I was in a “cash crunch”, so it was all the more tempting. I am actually one of the many former Wachovia customers that were forced to succumb to Wells Fargo’s conquest, and my account was transitioned into their new empire. Once I saw my online account info for the first time under the new Wells Fargo system, I noticed a small link right beside my available balance, entitled “Direct Deposit Advance” (think there’s no psychology involved in the placement of that link? Think again.). I knew that it probably dealt with some type of lending since the word “advance” was used, so I clicked on the link to find out more details. The page it took me to basically stated that if you have any kind of direct deposit connected to your account such as your payroll check, or other similar benefit-related income source, you have the ability to borrow against that money before your next payday, and then whatever you borrow will be automatically deducted from your direct deposit when it comes in—plus, some pretty hefty fees as a charge for the service, of course. To avoid any misstatement of what the terms are, I will give you Wells Fargo’s own words as to the purpose and fees of the direct deposit advance: “This is an expensive form of credit intended to meet short term and emergency borrowing needs. For every $20 that you advance, your Advance Fee will be $2.” Now for the mathematically challenged among us, this equates to 10% interest off the bat for whatever amount of money you want to borrow. While this is relatively tame, especially when you consider the absolute financial rape that goes on with credit cards and their 25% (and higher) interest charges, it’s not so much the actual interest rate that’s the issue—it’s more about the convenience and ease of credit that this service extends to people, and the fact that this can feed a “financial addiction” of sorts. What do I mean by a financial addiction? The Wells Fargo Direct Deposit Advance provides very easy (actually, way too easy) access to instant cash, and given most human beings’ inclination towards instant gratification, it feeds a cycle of dependency to where you end up living your life always looking forward to the next “cash fix”, because you have spent all of your available cash, and then some. It is truly like a drug addiction—you start out feeling like you’re totally in control, but then in what seems like the blink of an eye, you find that the habit is now controlling you.

Image courtesy of Google Images
Image courtesy of Google Images

Direct Deposit Advance from Wells Fargo

In the interest of not trying to sound like an irrational extremist, I don’t want to paint the picture that this service is illegal or anything like that. It’s perfectly legal, but as to whether or not it’s ethical is a whole other argument. In its purest form, the Direct Deposit Advance is nothing more than a glorified payday loan, and we know that those types of loans are specifically desired to cater to working-class people who have jobs but are not able to access any credit with decent interest rates. Interestingly enough, some of you may be surprised to find out that large banks such as Wells Fargo, Bank of America, J.P. Morgan, and U.S. Bank are heavily involved in the payday lending industry. As a small example, I’m going to quote a section of a post from the website BanksterUSA.org, which talks about how the same banks that you and I bailed out in late 2008 are now working hand-in-hand with some of the most predatory payday lending companies. Check this out: “The biggest payday loan firm is the Orwellian-named Advance America, a publicly traded firm listed on the New York Stock Exchange with over 2,500 outlets in 32 states. Wells Fargo, Bank of America and U.S. Bank provide a $75 to $300 million line of credit to the firm at interest rates ranging from four to eight percent on the loans. In recent months, Advance America's booming profits have been noticed and it has been touted as a “good investment” by Wall Street insiders.” (Original post can be found here). Folks, let’s not fool ourselves—payday lending is big business, and it’s just the type of lending that the money junkies on Wall Street love to be a part of. It’s basically loan sharking, to a level that even the Mafia would be hesitant to go to. And the insidious thing about the Direct Deposit Advance being offered by Wells Fargo is that this is something that you don’t even have to leave your house anymore to do. You don’t have to go to the “other side of the tracks” to the impoverished neighborhoods (where, sadly, most of these payday loan stores are located) to set one up; now you can do it in the privacy of your own home, without anyone having to know about it. In my mind, it’s no different than what happened when porn really hit the Internet—a person no longer had to go to a convenience store and risk the potential embarrassment of buying one of the magazines with the black wrapper around it; now you can just turn on your computer and look at as much as you want, and nobody has to know. So while the Wells Fargo Direct Deposit Advance may provide a benefit to a small percentage of the people who will use the service, and while a small percentage of people out there will be able to “rein in” their impulsive need for quick cash and only use the money for true emergencies, the majority of people simply will not be able to exercise the self-control necessary to use the Direct Deposit Advance without ending up being abused by it.

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    • SteadyHubs profile imageAUTHOR

      SteadyHubs 

      7 years ago from Georgia, USA

      @ The Loan Arranger: Thanks.

      @ MikeNV: I appreciate it. You're absolutely right about the layout--I just don't feel like doing all that. LOL!

      @ Nina: Thanks, and I don't blame you for never using it.

      @ SPC: Thanks, my math sucked on this one, I should know that Wells wouldn't be that generous. :)

    • profile image

      SPC 

      7 years ago

      Actually- You're way off- the interest rate on a 2 week loan from WF using this service is almost 200% APR, not 10%. It's a very harmful and predatory product for them to be offering.

    • profile image

      Nina 

      7 years ago

      I agree with MikeNV. But this is a good article. I just noticed that they added it to my account. I will never use it.

    • MikeNV profile image

      MikeNV 

      7 years ago from Henderson, NV

      Not a fan of Wells Fargo either. If you would break this text up and add a few headings it would be a lot easier to read.

    • The Loan Arranger profile image

      The Loan Arranger 

      7 years ago

      Good info. Borrowers beware.

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