Need money before payday? What you need to know about payday advance apps
SAN ANTONIO – When Terry Patterson needed emergency money to visit his dad, he turned to a payday advance application.
He downloaded it to his phone and took a $50 advance on his next paycheck.
“When I was able to do that, I had enough money to at least cover some gas along the way and some snacks,” he said.
Paycheck advance apps are gaining popularity as an alternative to a payday lender that often involve exorbitant interest rates. Paycheck Advance apps allow you to request a portion of your next paycheck before payday, usually for a free or subscription cost ranging from $1 to $10. Then, on payday, the advance is reclaimed by withdrawing the money from your bank account or paycheck.
It sounds easy enough, but Consumer Reports has a warning.
“These services can be great for helping you get out of a pickle once in a while, but you really have to be careful not to make it a regular habit,” said Octavo Blanco of Consumer Reports. “If you end up using these services regularly, the fees you pay can add up.”
Research shows that people who use these types of apps tend to take out advances regularly and can sometimes find themselves in a vicious cycle of borrowing.
MoneyLion says its app helps its members pay bills and avoid overdraft fees and gives them better control over their finances.
There are other options. If you can’t pay your bills each month, Consumer Reports suggests looking for a bank or credit union that offers small, short-term loans. The APR generally does not exceed 36% and can help build credit.
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