You may be wondering if bi-weekly payment plans are scams. Some people say yes, others say no. It’s time to dig into this topic in more detail so you can make an informed decision and proceed with clarity and peace of mind.
First, Let’s Review the Definition of a “Scam”
As per our dear friends at Merriam-Webster, the definition of “scam” is:
A fraudulent or deceptive act or operation. Well, let’s just break that down a bit further with their definition of “fraudulent”. The definition of “fraudulent” is: intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right. Okay, just one more definition. This time, let’s look into their definition of “deceive”: to cause to accept as true or valid what is false or invalid.
Our bi-weekly payment program is not a scam because it is neither fraudulent nor deceptive.
Not a “Scam” by Definition
Specifically, our bi-weekly payment plans automate bi-weekly payments by electronically transferring money from your checking or savings account, to our FDIC bank, then to your existing lienholder. As a result, your loan is paid off early and you save a lot of money. Furthermore, our bi-weekly payment plans go beyond just paying your loans off early and saving you money. Please click here to link to another of our blogs with further details.
There is a fee associated with our bi-weekly payment plan which is clearly disclosed to compensate our bank for the aforementioned benefits.
All of that information, from months saved, money saved, all the way to fees charged, is very clearly disclosed. No scam, no fraud, no deception.
Scam or Not a Scam
Those who believe a bi-weekly payment plans to be scams focus on three areas: such plans don’t really pay bi-weekly, the companies that manage these plans charge interest while your money waits to be transferred to your lienholder, and the plans charge a fee for what you can do for free.
Let’s review these topics one at a time.
Do Bi-Weekly Payment Plans Pay Your Lienholder Bi-Weekly
More often than not…no. And that is because the lienholder (bank) is not able to receive your bi-weekly payment every fourteen days. Their banking systems are simply not programmed to receive less-than-full monthly payments every fourteen days. Furthermore, more likely than not, if you read your loan contract very carefully, you may discover that it says right there in your contract that you cannot send the lienholder bi-weekly payments every fourteen days.
Whose Fault is That?
Now whose fault is that? The lienholders, if you ask me. Now don’t get too upset with them. Afterall, they’re in the business to make money, and one way the banks do that is by charging you interest on the money you borrow from them. That being said, it is in their best interest for you to go full term with your loan.
Interesting thing is, most simple interest loans can be paid off early, with ZERO interest penalty. It’s been that way since at least the 1980s.
Problem Meets Opportunity
What we have here is a bit of a problem. Specifically, people want to (and are legally able to) pay their loans off early without an interest penalty, but the banks don’t make that as easy as we would like it to be.
And that problem, or challenge, created an opportunity. And that is why we now have organizations that automate bi-weekly payments to lienholders.
So Why Are They Called Bi-Weekly Payment Programs?
So why are these programs called bi-weekly payment programs? Because they pull money from your checking or savings account every fourteen days, hold it until the payment due date, then transfer it to your lienholder. Twice a year, these organizations pull three payments from your checking or savings account before the payment due date, so when the money is transferred to your lienholder, you have made an extra half payment. That happens twice per year. As a result, you actually have money pulled from your account 26 times. Well 26 divided by twelve months in a year equals thirteen. And that is precisely how you make an extra payment a year—the very essence of all bi-weekly payment plans.
That delay in transfer of your money to the lienholder leads to the second area of concern people have with bi-weekly payment programs.
Does the Organization Managing Your Bi-Weekly Payment Plan Collect Interest on Your Money?
The FDIC bank that manages our bi-weekly payment program does NOT collect interest on your money as it is being held pending transfer to your lienholder. In fact, it is held in a zero-interest bearing account, as specified in your bi-weekly payment plan contract with our FDIC bank.
Not All Management Companies Are the Same
That is not the case with all companies that run bi-weekly payment programs. In fact, we are quite an anomaly, because there are precious few FDIC banks that manage bi-weekly payment programs.
Money Transmittal Companies
In some cases, these programs are managed by money transmittal companies. And that, in my opinion, is why bi-weekly payment programs have a bad reputation. These money transmittal companies are an interesting lot, and you need to understand a bit better how they work, because in my opinion, they need to be avoided.
Money Transmittal Companies Are Not Banks
A money transmittal company is not a bank. Think about that for a second. These companies handle millions of dollars of customer money…but they aren’t banks.
Furthermore, they aren’t licensed to transfer money in every state. And that could be a big problem for you if you live in a state where the money transmittal business is not allowed to conduct business. It’s also a problem if you are using one of these money transmittal companies to manage your bi-weekly payment plan, and you move to a state where they are not licensed to do business.
Worse yet, more often than not, they DO collect interest on your money as they hold it pending transfer to your lienholder. I don’t know about you, but I really don’t want anybody making money, on my money, as they are supposedly trying to help me by administering a bi-weekly payment plan.
On to the final topic: is there a fee?
Is There a Fee Associated with a Bi-Weekly Payment Plan
Yes.
Benefits
Every company that manages a bi-weekly payment program provides a service: automation of a bi-weekly payment plan that results in early loan payoff and money savings. Our FDIC bank also provides convenience, control, and support benefits that go well beyond just helping you pay your loan off early and save money (click here for more details).
Convenience
And it’s not just money savings that attracts people to bi-weekly payment programs. It’s also the convenience. Specifically, the TIME SAVINGS that result from letting our FDIC bank automate this process for you. The reality is that our lives are busier than ever because so many of us are spending an inordinate amount of time just trying to keep our heads above financial water.
Do the Program Benefits Exceed the Program Cost?
Automation, early loan payoff, money savings, convenience, control, support and time savings. Those are the benefits. You simply have to ask yourself: do the benefits outweigh the cost of the program (which by the way comes out of your interest savings…not charged up front)? Millions of Americans have said yes. In fact, tens of billions of loan payments have been processed and have saved customers tens of millions of dollars since these plans have been available.
“But I’ll just do it on my own” you say. After all, pundits out these recommend you simply add 1/12th of your monthly payment to each loan payment you send to your lienholder as a means of managing this program by yourself at no cost to you. Sounds great. But the problem is: IT’S NOT HAPPENING! I’ve written a separate blog titled Stop Lighting Your Money on Fire which very clearly illustrates, and proves, that most American are definitely not managing bi-weekly payment programs by themselves.
Conclusion
Confusion? Yes. Scam? No.
Bi-weekly payment plans are NOT scams. But there certainly is some confusion in the market about bi-weekly payment plans. I hope the details provided will allow you to make an informed decision and proceed with clarity and peace of mind.
The reality is, personal debt levels are higher than ever and personal savings are lower than ever. Something has to be done to get us back on a healthier financial track.
The Decision is Yours
Our FDIC bank managed bi-weekly payment program is the most powerful such program on the market. I truly hope you decide to let us help you get on the path to personal and financial freedom by contacting us, asking us any questions you may have, enrolling your loans in a bi-weekly payment plan, and letting us be of service to you.
