Should you use a Paycheck Advance app? | Smart change: personal finance
Some advances are subject to additional charges. Dave, another paycheck advance app, offers three optional fees: a $ 1 monthly subscription fee, an express fee to get your money faster, and a tip.
For a few hundred dollars – the maximum amount you can borrow from most apps – the fees aren’t as high as most payday loans or overdraft fees.
But asking the user to decide how much to pay doesn’t give them the ability to assess the total cost of borrowing in the same way displaying an annual percentage would, says Marisabel Torres, director of policy. Californian at the Center for Responsible Lending.
âNot calling it a fee and presenting it as a tip is actually dishonest for the user because it is confusing how much this product is actually costing you,â she says.
The risks: overdrafts, chronic borrowing
To sign up with a paycheck advance app, users normally need to provide proof of their payroll schedule and income, and often access their bank accounts so that the app can withdraw the money. ‘they owe when they get paid.
Some apps say they will monitor your bank account and try to avoid a debit if your balance is too low. Charging too low a balance can result in overdraft fees – fees that some apps offer as an alternative – and you may need to borrow again.