Contrary to widespread belief, payday loans are highly regulated by state laws, as reported in the Iowa Independent on Jan 12 2009. There are rules which limit the number of loan transactions, transaction amount and fees. There are also federal laws that protect the consumer, including full disclosure of fees. In comparison, overdraft transactions by banks and credit unions do not have this government regulation.

In a press release dated January 6 2009, it was reported that payday loan can be a cheaper alternative to overdrawing a bank account.

So, another important tip to know before you apply for your payday loan is to know the law in your state regarding payday loans. Different states have different laws governing payday loans, so it would make sense to check this out first.