The following is a guest post by Tim Chen, CEO of NerdWallet, a website that helps you find the right credit card based on your lifestyle, by filtering nearly 600 credit cards to either maximize rewards or minimize APRs.  Tim writes about credit cards for the Forbes Moneybuilder Blog, Huffington Post, and the Christian Science Monitor.

At the end of the month, you're short $150 to pay the bills.  You need that money immediately to keep the lights on, so what’s your best bet? what do you do?

Here are your most common choices:

• Go to your bank's ATM, and overdraft your checking account once,
• Charge it on your credit card, and eat 14 days of interest. For the sake of argument, assume you are paying “Default” APR rates, which are the highest legally permissible,
• Get a payday loan and risk getting charged usury rates.

Pretty grim options, aren't they?  No matter what you do, you'll be paying.  So what's the cheapest option?

Payday loan centers generally have bad reputations for a reason, but in this situation they actually outperform the overdraft option. We’ve done the math for you below.

The numbers speak for themselves - never use “overdraft protection”.  A payday loan is better, and adding it to a credit card balance is an even better proposition if your credit is good enough to obtain one.

If you ever need to do a similar comparison on your own, try an online payday loan APR calculator.

More Reasons to Avoid Overdraft Protection

If you have a checking account, chances are you’ve been getting harassed by spam and bank tellers begging you to participate in overdraft protection. The reason this is happening is because the Federal Reserve found the practice so appalling that they banned it.

Before August 15, 2010, your bank could opt you in for overdraft protection without your consent. This doesn’t seem like a big deal, but when your account is empty, you get charged $35 each time you use your debit card, until you realize something is wrong. Numerous lawsuits have been filed regarding this matter, especially surrounding the practice of banks reshuffling the order of payments to ding you as many times as possible.

Given how lucrative this practice is for banks, it’s not hard to understand why I’ve received at least 15 letters from Chase over the past few months asking me to opt-in, and I’m sure you are seeing much of the same.

There seems to be a serious lack of awareness regarding the issue. Regional banks like TCF Financial claim that most people actually want this service, yet their average checking account gets hit with over $120 per year in overdraft fees. How they’ve managed to get 85% of their new customers to opt-in is beyond my comprehension, given that 5% of people end up paying over $1600 per year in fees, each, according to an FDIC study on overdraft fees. Lack of education must be part of the issue, along with some pushy sales kung fu.

To really nail the point home, Bank of America recently announced that they have ended overdraft protection at the point of sale, because it’s pissed off so many customers. In October 2010 they reported that 10% of customers were paying 70% of the overdraft fees, and that 10 million checking account customers jumped ship last year, largely because they were peeved about overdraft charges.

So Are Consumer Advocates Wrong to Push People Toward Debit?

Contrary to popular opinion, if you need money in a pinch, you actually come out ahead by running up your credit card rather than overdrawing your checking account. So savvy consumers would actually benefit from keeping an emergency credit card on hand. We recommend you ignore credit card rewards though, and get a low APR credit card with a low interest balance transfer offer. The reason this is a smart move is because rewards credit cards tend to have much higher APRs than those targeted for people carrying balances.

Another longer-term strategy for those with good credit is building an emergency cushion with a P2P personal loan.  Peer-to-peer lending has gained quite a following over the past few years because it offers lower rates.  As an example, if you have excellent credit, you could borrow $1,000 from LendingClub.com over the next three years at an interest rate of 5.42%, and that will give you a cash cushion to avoid ever having to overdraft.  At that interest rate, this loan would cost you about $86 plus a $20 fee, or $106.  That’s basically equivalent to three overdraft fees at $35 apiece, so you will likely come out ahead with P2P, while giving yourself enough time to build a cushion of your own.

Regardless of how you finance the loan, be careful not to fall into the cycle of coming up $100 short each month. The reason there are so many payday loan centers is because this happens to so many people, and it’s very good business.

We are thrilled to announce that residents of North Carolina can now apply for personal loans through LendingClub.com and borrow at lower rates.

North Carolina is home to more than 9 million Americans, the 9^th largest economy in the US with $395.1 billion in GDP in 2009, and a unique humid subtropical climate.

Arguably one of the most technologically advanced States in the country, North Carolina hosts Research Triangle Park (RTP), UNC Chapel Hill, and North Carolina State University, 3 well known research and development hubs for Green Technology, Bio-Chemical Engineering, Medical Sciences, and Computer Engineering.

The Tar Heel State’s history includes the first successful powered flight by man when the Wright Brothers were able to lift their airplane 20 feet above a wind-swept beach in North Carolina for 12 seconds and a distance of 852 feet.

Food also peppers North Carolina’s history: Krispy Kreme Doughnut was founded in Winston-Salem, Pepsi was invented and first served in New Bern, and barbecue sauce tastes the best here.  Lexington is the Barbecue capital of the world, serving more than 11,000 pounds of barbecue goodness to more than 100,000 people during its annual festival.

Now I’m hungry…

If you’re a North Carolinian and you’ve never heard of Lending Club, let us tell you about how our service works:

• Lending Club offers unsecured personal loans of up to $25,000.
• You can use a Lending Club personal loan to do things like refinance or pay off debt, make major purchases, cover medical expenses or invest in a small business.
• Annual percentage rates (APRs) start at 6.78% [i] which is nearly half the average starting APR of 13.15% [ii] offered on credit cards to similar borrowers.

So whether you are a Panther, a Hurricane or a Tarheel, we may have a great rate on a personal loan for you.

As of October 27, 2010, your southern and northern neighbors have all been busy on Lending Club, with more than $14 million in personal loans issued to residents of North Carolina' neighboring States through LendingClub.com:

• In Virginia, over $6.3 million in personal loans have been issued through Lending Club.
• In South Carolina, over $1.8 million in personal loans have been issued through Lending Club.
• In Georgia, over $5.9 million in personal loans have been issued through Lending Club.

Over $172 million in personal loans have been issued to borrowers through the Lending Club platform for needs ranging from debt consolidation to special events. Thousands of Lending Club borrowers across the country have taken advantage of Lending Club's fixed-rate loans to pay down credit card debt, fund home improvements and green loans, plan their dream vacations and weddings, buy cars and boats, or re-invest in their businesses.

Want to learn more?  Check out how Lending Club works and how we can offer better rates on personal loans.

We believe our service is able to play a vital role in North Carolina by providing much needed capital to credit-worthy borrowers who want to pay down their credit card debt, purchase new fun toys like motorcycles, cars and boats, pay medical bills or expand their small business.

By opening our doors in Kansas last week, and in North Carolina this week, Lending Club loans are now available in 42 States.

Welcome North Carolinians!

@RobGarciaSJ

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