Are payday loans better than overdraft fees?

This post comes from Matt Brownell at partner site MainStreet.

If you're in the habit of running out of money and bouncing checks, a new study suggests that you might be better off going to a payday lender.

The study from Moebs $ervices, an economic research firm, found that consumers who bounce a check get hit, on average, with a $28 non-sufficient funds fee by their bank. That's compounded by an average $30 penalty assessed by many retailers. Some banks let you avoid the embarrassment of a bounced check by offering an overdraft service, but the study found that those cost you an average of $34 per check.

Overdraft fees differ a bit from institution to institution; according to our sister site RateWatch, credit unions tend to be a bit more lenient, charging check-bouncers an average of $27 versus $31.17 at banks. But either way you cut it, consumers who try to spend more money than they have wind up paying dearly for it, and the report estimates that approximately 34 million people bounce checks more than 10 times a year.

So what's your alternative if payday is a few days away and the cash in your checking account doesn't cover the purchase you want to make? Credit cards are, of course, the weapon of choice for consumers who want to spend more money than they have. But for those who don’t qualify for a credit card, there's an alternative: payday loans.

"Payday lenders can provide a good alternative source," says Mike Moebs, the firm's CEO. "The small loan market … is driven by people who don’t have FICO scores high enough for a credit card."

So are payday loans really a good deal?

Like any high-interest loan, it depends on how quickly you pay it off. Moebs points to the example of someone with $500 in the bank who needs to make a $700 purchase. A $200 loan at 17.5% per pay cycle means an extra $35 on top of the $700, provided you pay it off as soon as the next paycheck comes. If the alternative is bouncing a check and losing more than $50 between the bank and the merchant, clearly the payday loan is your better bet. Post continues after video.

With that said, most payday borrowers aren't quite so responsible. Moebs says that the average payday loan is a little under $500, and gets paid off in 3.1 pay cycles, which means that the interest will build up quite a bit more. And a study conducted earlier this year by a consumer watchdog group found that payday lending often led people to long-term debt problems.

So if you need a small loan to get you to payday and you're confident you can pay it off in time, a payday loan beats bouncing a check if you can pay the loan quickly. Just be careful.

More on MainStreet and MSN Money:

• Credit unions offer payday loans
• 5 places to never use your credit card
• More banks may offer payday loans
• With credit cards, nice guys finish last
• Find a better credit card
• Credit cards are offering more rewards