Benefits and Dangers of Paycheck Advance Apps – NBC 5 Dallas-Fort Worth

Do you need cash fast? No need to go to a bank or payday lender. Paycheck Advance smartphone apps are growing in popularity as a way to get some quick cash when you’re in trouble. Although these applications can be useful in certain situations, consumer reports warns that there are potential downsides you should be aware of.

Paycheck advance apps let you request a portion of your next paycheck before payday, and there’s usually a fee or subscription fee ranging from $1 to $10. Then, on payday, the advance is collected by debiting the money from your bank account or directly from your paycheck.

These services can be great to help you get out of a traffic jam here or there. But you have to be careful not to make it a habit. If you end up using these services regularly, the fees you pay may add up.

Research has shown that people who use these apps tend to take advances on a regular basis. And because the apps are widely used by minimum-wage workers, that means they sometimes find themselves in a vicious circle of borrowing.

So if you can’t afford to pay the bills every month, consider looking for a bank or credit union that offers small dollar short-term loan services. The APR on these loans usually does not exceed 36% and they can also help you build your credit.

Cash advance situations can still have high credit issues, and you want to be very financially responsible when considering any of these types of things.

MoneyLion tells consumer reports that its app helps its members pay their bills and avoid overdraft fees, and gives them better control over their finances.

Darcy J. Skinner