The Truth About Payday Advance Apps
If you’re using payday advance apps, proceed with caution.
Payday Advance Apps allow you to borrow against your next paycheck with limited fees. Today, payday apps have soared in the financial tech industry to help individuals in financial need. While these apps market themselves as “payday loan alternatives”, they provide similar services to payday loans (which are short-term loans with excessive interest rates).
To date, the use of payday apps has risen amid the pandemic. Here’s what you need to know?
How do these apps work?
Many payday apps provide users access to their paycheck early. These apps typically have limits on how much a user can borrow from depending on the paycheck cycle, the user’s spending habits, and income. Money borrowed from these apps is paid back on the next payday.
Here’s a scenario breakdown of these apps’ work: Judy finds herself in a bind and needs a quick $100 to borrow until the next payday, she decides to use a payday app. On her next check deposit date, $100 is automatically deducted from her paycheck with a $3.99 deposit fee, with her payment totaling $103.99.
Do borrowers pay high fees to borrow?
It depends on which apps you use. Traditional payday loans have enormous fees associated with borrowing money, however, payday apps are supposed to be an “inexpensive alternative.” When using these apps, individuals should proceed with caution. Some apps charge fees for individuals who need instant deposits into their accounts and offer fee-free deposits for those willing to wait 1-3 days for a deposit to be sent to their bank.
While others encourage users to provide “tips” to their platform. Tips are often not required, though many applications encourage tipping and applications may frequently ask users to tip during each advance transaction.
In 2019, The New York State Department of Financial Services launched an investigation on the payday app Earnin, tip procedures. The Department raised caution to the platform’s claims about having no loan, fees, or hidden costs, however, the platform has suggested tips to users that equate to 730% APR on money borrowed. YIKKKKKKKKKKKKKKKKKKES.
Are you able to access other kinds of financial products through these apps?
MoneyLion is a fin-tech app that provides various financial products, including short-term loans aside from payday cash advances while other applications provide budgeting software and monitor your financial habits.
Is it true that you can fall into a cycle of depending on using these applications?
YES. Using these applications while helpful in the short-term they can create a consistent cycle of dependency especially you’re living paycheck to paycheck. Regular use of payday applications can trap you in the cycle of constantly borrowing against your paycheck! You deserve to keep your COINS.
Nevertheless, if you find yourself in need of using payday apps Broke Black Bougie has a spreadsheet of payday apps that may be of interest to you. Check it out to read more in-depth about payday apps and services.
