Noted bloggers Megan McArdle (The Atlantic) and Felix Salmon (Reuters) recently had a bit of back and forth about payday lenders and credit unions, and as a (former) credit union customer, I was intrigued by the arguments both were making about how credit unions should be making more of the short-term small loans that payday lenders make, but at much less usurious rates. AND that more people should become credit union members. AND that the missing element is education (if only people KNEW how payday lenders and check cashers were treating them, the would ALL flock to banks and credit unions). But who really doesn’t understand that payday lenders charge astronomical interest rates? and that the one benefit of a payday lender over a loan shark is that your thumbs won’t get broken? Is it really an education gap?

Or is it that banks are an unwelcoming place to people who are unfamiliar with them? The 99% Invisible blog and podcast did a  show on the design of payday lending and check cashing stores back in March 2011, and it is worth a listen. As a “retail” operation for a broad client base, banks fail on many fronts. What the bank is offering is not always apparent (other than current CD rates, and maybe not even that); there are almost never prices posted for their services; and you need to have some numbers (a PIN, some balances, something) to get any service. A check cashing store is absolutely transparent about what you can get there and what it will cost. Isn’t that worth something to a customer?