WILKES-BARRE, Pa., April 12, 2011 /PRNewswire-USNewswire/ -- If you need quick cash to address an unexpected emergency or to pay bills due before your next paycheck, State Treasurer Rob McCord wants you to know there is a money-saving alternative to predatory payday loans that can also help to improve your finances in the long-run. It's called the "Credit Union Better Choice" program, and it has already saved Pennsylvania consumers $15 million in exorbitant fees and interest as compared to traditional payday loan products that can lead to a perilous cycle of debt and financial ruin.
Treasurer McCord visited Cross Valley Federal Credit Union today to tout the program, which is a partnership between Treasury and the Pennsylvania Credit Union Association, and to hear firsthand how the program has helped three local women meet unexpected expenses, while starting on the path to financial security.
"We've all heard the horror stories – people who need to access cash they don't have quickly go to a payday lender and end up drowning in fees and outrageous interest rates that routinely exceed the equivalent of 400%," said Treasurer McCord. "Too often, the people who fall prey to these payday lenders are those who are already struggling economically or are living paycheck to paycheck. We want them to know there's an alternative – appropriately named the 'Better Choice' program."
Treasurer McCord explained that a typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or approximately $450 over 90 days. A $500 "Better Choice" loan costs consumers approximately $42.50 for the same 90 days.
As a condition of receiving the loan, the borrower agrees to deposit an additional 10% of the borrowed funds into a savings account, which allows them to develop a savings habit. The program reinforces this wealth-building component by offering financial counseling to help borrowers make better financial decisions.
Participating credit unions have made 43,000 "Better Choice" loans totaling $20.5 million since the program's inception in 2006, saving consumers nearly $15 million in fees and interest typically associated with payday lending products.
Cross Valley Federal Credit Union has issued 280 "Better Choice" loans to 101 members since 2007. Three of those members – who asked not to be named to protect their privacy – told Treasurer McCord how the program helped them.
"These three women – like thousands of other citizens across the state – are putting their financial houses back in order with the help of the 'Better Choice' program," said Treasurer McCord. "Coincidentally, April is National Financial Literacy Month. Now is the time for those who might be living paycheck-to-paycheck to take control of their financial future by developing a monthly budget and begin building their personal savings. This program – with its financial counseling services and savings component – can help to get you started."
"Better Choice" loans are available at 79 credit unions with 222 locations in Pennsylvania, and additional credit unions continue to sign on.
"We're pleased that our partnership with Treasury allows borrowers access to low-cost loans for short-term borrowing needs through credit unions," said PCUA President and CEO Jim McCormack. "Every day, credit unions work to better the lives of their members and this is just one way in which credit unions can help."
"At Cross Valley Federal Credit Union, the decision to offer our members the 'Credit Union Better Choice Program' was an easy one," said Edward Kaushas, President and CEO, Cross Valley Federal Credit Union. "This program best illustrates the fundamental mission of credit unions, which is that of 'People Helping People.' We are delighted to know that because of this program, we have been able to reach out and make a difference in the lives of our members and their families."
To learn more about the "Better Choice" program and to find useful information on financial education, please visit www.patreasury.org.
SOURCE Pennsylvania Treasury Department