Silver Springs, Nev. - May 16, 2008 - Which costs less: a payday loan or bounced-check protection? The answer's obvious, right?

Not so fast.

A study released last week says overdraft protection on a bad check can cost you an interest rate of more than 4,000 percent on average or some 20 times more than a payday loan.

Conducted by East Carolina University Assistant Professor of Economics Mark Fusaro, this independent, first-of-a-kind study finds that while payday lending attracts attention for its interest rates, overdraft protection loans are much more expensive.

To make matters worse, in his study called "Hidden Consumer Loans: An Analysis of Implicit Interest Rates on Bounced Checks," Fusaro says: "A person who has a three dollar overdraft that is outstanding for one day pays an implicit interest rate of 260,245 percent." He adds that frequent over drafters can pay fees exceeding $3,000 a year.

No wonder then that payday loans are increasing in popularity across the country. According to Cypress Research Group, six out of 10 payday loan customers are homeowners and 65 percent have household incomes between $25,000 and $75,000 a year.

Cypress Research says most are taking loans to help with unexpected expenses such as medical bills. And, no surprise, to avoid late charges on bills also ranks high along with avoiding bounced checks.

According to the Consumer Credit Research Foundation, the $30 fee on a typical two-week payday cash advance is 391 percent when expressed as an annual percentage rate. While that's no walk in the park, it's a far cry from 4,000 percent.

Convenience is another reason. Sites like PayDayFinder.com allow people to shop for the best rates and find nearby payday loan or cash advance stores in their neighborhoods or when traveling.