Payday Advance Applications | Savings and budgeting
TV commercials make payday advance apps so wonderful, so useful, so perfect. Are you strapped for cash? Well, just get your paycheck a few days in advance.
You can’t blame anyone for viewing these ads with suspicion. When companies promise you easy money, you can usually expect big fees.
But unlike payday loan stores and online loan websites, some payday advance apps are actually quite useful.
Still, you should look with suspicion on even useful payday apps, and you really need to be aware of what you are getting yourself into.
What are Payday Advance applications?
The idea behind payday advance apps is that they advance your paycheck, or a portion of your paycheck, early for a small fee.
Some of them do, but they are all different, and some may be less appealing than others when you compare and rate their differences. But not all of them should be described in a pinch as predatory businesses, according to Ryan Cicchelli, founder of Generations Insurance & Financial Services, a financial planning services company in Cadillac, Michigan.
“These applications are, on the whole, a far cry from the much more unpleasant practices seen in mall loan stores,” Cicchelli said.
That’s not to say that Cicchelli thinks people should drop everything to download a payday advance app. âLet’s not forget that any kind of payday advance can create a slippery slope that puts people in greater danger down the line,â he says. âPeople should only use these services after carefully weighing the pros and cons. But for people who only need a few dollars to get through the week, these services can be a lifeline. they’re probably cheaper than adding anything to a credit card balance. “
We’ll dig deeper into the pros and cons of payday advance apps, but if you want to learn more about these apps and how they differ from each other, the big names include:
- To win.
If you have a Chime online bank account and your employer offers direct deposit, your check will become available as soon as your bank receives the money. Typically, many banks will have checks for 48 hours before they are available to the consumer; Chime just manages to get the money to you faster. Its TV commercials tout the element of payday advance, but it’s actually an online bank account with a payday advance feature.
It is also an online bank account with some payday advance features. Like Chime, Varo can send your paycheck to you by the time it reaches the bank account, which is typically 48 hours earlier than conventional banks. And if you need your money sooner, Varo will give you a $ 20 cash advance for free. But if you need more than that, you’ll start paying. The maximum of your paycheck that you can have advanced is $ 100, and the maximum that you will pay for this is $ 5, which you will need to pay back within 15-30 days.
This payday advance app will send you up to $ 100 per day and up to $ 500 from your paycheck. You must offer your checking account information and prove that you have a paycheck; freelancers may have a hard time proving it to Earnin’s eyes. But he will give you that money for free and without interest. You are just asked to pay a tip; he suggests 4%.
The payday advance application will send you up to $ 250 that you have already earned in a minute. You need to show proof of your monthly income and also that you have had your bank account for some time (it should be at least 60 days old which is common among these apps).
Once Brigit is convinced that you are on the right track and truly receive a paycheck, you can get a cash advance of up to $ 250. Once you get paid, an automatic withdrawal of what you owe Brigit will be sent back to the payday advance app. There is no charge and no tip request. If you want to use additional features like setting up to get a small cash deposit whenever your balance is about to drop below zero, you can pay a monthly fee of $ 10. To avoid an overdraft fee of some $ 30, you may think it’s worth it.
Such a likeable name. So what do you get with Dave? Well, you can get up to $ 100 upfront, although there is a way to get $ 200 (that involves getting a Dave debit card and Dave spending account). No interest will be charged, but you will be asked for a “tip”. You will also need to pay a monthly membership fee of $ 1 to use the app. It should also be noted that if you need the cash quickly, say within eight hours, you will need to pay a fee of $ 4.99. But if you plan and can wait a few days, there is no charge.
There are some additional features which are nice. For example, if your account balance is low or you don’t have enough money to pay a bill that Dave knows will be due soon, you’ll get a notification. In other words, Dave will help you manage your money.
The advantages and disadvantages of Payday Advance applications
The benefits of payday advance applications should be pretty clear. If you use one, you can either get your full paycheck a little earlier than at other banks (at least that’s common sense), or you can get a small payday loan, usually between $ 100 and $ 250, for a relatively low and interest-free fee. Compare that to payday loan stores and online loan stores, both of which can really absorb consumers with their high interest loans.
One downside to payday advance apps is that they don’t do very well as a permanent or repeat solution. If you are constantly short of money and by frequently using payday advance apps, you might find yourself in a cycle where each month you are spending money to get your own money a little earlier. The cycle might not be as bad as with a payday loan store, but it can be a cycle of debt and cash flow shortages nonetheless.
Justin Nabity, certified financial planner and founder and CEO of Physicians Thrive, an Omaha, Nebraska-based physician financial advisory firm, believes payday advance apps can come in handy in a financial emergency.
âThese apps allow you to get cash up front that can easily cover small expenses and save you from high interest bank loans,â says Nabity.
But he wouldn’t recommend making a habit of using payday advance apps.
âThis is not a long-term solution, and regular use of these apps can lead to unhealthy financial habits,â says Nabity.
After all, anyone with a checking account and a regular paycheck should always have at least one goal: to reach the next pay period with some extra money in the bank. If you have an occasional shortfall, what should be usual is accessing a savings account for more money rather than paying a service to get your money a little earlier.
It is not easy to extend a salary if it is low at the start. If you use a paycheck advance app sparingly, it will probably be more useful than harmful.
But if you use payday advance apps on a regular basis, especially the ones that charge a nominal fee, you’re essentially creating a new bill or expense that you incur once or twice a month. Meanwhile, if you’re constantly using payday advice apps, you’re probably not putting money aside in a savings account. Which means if your car breaks down or you need to call a plumber, you might need a large amount of money that cannot be covered by a payday advance application. And what else?
This is when you can turn to a payday loan store or an online lender with sky-high interest rates.
The bottom line: If you are going to use payday advance apps and want to grow financially, you should use them sparingly.