Fifth Third Unveils 260% APR Payday Advance Product

2 min readMay 10, 2021

Under the guise of helping consumers with low balance bank accounts avoid fees, Fifth Third Bank is now offering a new product based on a current account feature called Early Access.

The new product, MyAdvance, allows customers to take out an advance of between $50 and $1000 against their next direct deposit. Based on the fees or rates charged for Early Access, customers would pay a 5% fee for advances taken out in the first 18 months of using the product and 3% thereafter. These numbers represent an effective APR of 260% if an advance is taken one week before payday.

Laura Alix offers more in American Banker:

The $207 billion-asset Fifth Third will give customers extra time to replenish balances before an overdraft penalty is charged, post direct deposit payroll funds earlier than before and make advances against future direct deposits for a fee.
The new product will have a feature called MyAdvance, which allows customers to take out an advance of $50 to $1,000 against their next direct deposit for a fee. Fifth Third had previously offered this feature under the name Early Access, and it had only offered it to those customers who had been with Fifth Third for at least a year. The newer iteration will be available to Momentum checking customers after two direct deposits.

While taking an advance against a direct deposit could minimize overdraft fees, it also carries a relatively high APR — 260%. The move comes as the Consumer Financial Protection Bureau (CFPB) recently released a report on the cyclical nature of payday, car title, and pawn loans.

That report notes:

. . . consumers frequently roll over these loans or take out a new loan soon after re-paying the previous loan. In June 2019, of the consumers who had taken out a loan in the previous six months, 63 percent still owed money on a payday loan; 83 percent still owed money on an auto title loan; and 73 percent still owed money on pawn loans . . .

It seems the Fifth Third product would be susceptible to a similar rollover, effectively creating a debt trap for customers simply attempting to cover a short-term cash shortfall.

While it is possible that if used on only a limited basis, the product would allow customers to avoid the much higher fees associated with overdraft, the data from the CFPB suggests that the initial use of this product may kick off a debt trap cycle from which the consumer is unable to recover.