Payday advances can place credit history at an increased risk

That loan of ВЈ11 from Wonga, the cash advance business, for just two days would price ВЈ5.83, weighed against up to ВЈ25 for an unauthorised overdraft. Photograph: David Levene for the Guardian

Cash-strapped borrowers who will be tempted into taking out fully an online payday loan in order to avoid the astronomical expenses of an overdraft that is unauthorised face a whole lot worse problems in the future, the Financial Ombudsman has warned.

The web site replicated the problem of somebody operating away from money right before their payday by comparing the expense of borrowing ВЈ11 for 2 times from Wonga, and through an unauthorised overdraft with six high-street banking institutions. As the Wonga loan would price ВЈ5.83, RBS and NatWest would charge ВЈ12, Santander would charge ВЈ20, Barclays ВЈ22 and HSBC ВЈ25.

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