You get paid next week, but your credit card bill is due this week, and, oops, so is that new car payment. You’re only a few hundred bucks short — you just need a way to bridge the gap.
Unfortunately for you, there’s an app for that. Actually, there are dozens. They’re called cash-advance apps. And most things about them tick me off.
Their names make it sound like you’re borrowing from a friend, like “Dave,” “Albert,” or “Brigit,” or like they’re giving you a leg up, like “Empower.” But trust me, there’s nothing empowering about them.
I dug up the dirt they don’t want you to know about and how to avoid getting caught up in their scheme.
What has two thumbs and owes 376% interest?
You, if you fall for this BS. These apps are just big yellow Payday Loan signs with a fresh coat of paint. They target folks living paycheck to paycheck, and once you’re in their clutches, it’s nearly impossible to get out.
Get this: The average APR on an advance from these apps is 376% — pretty much identical to a typical payday loan’s 400% markup. And that’s if you manage to repay it in one to two weeks.
And you probably won’t. Studies show that 75% of people take out another advance the same day or day after making a repayment. And if you’re using one, there’s a good chance you’ll get hooked into others, too.
On top of ludicrous fees …
They ask you to “tip” for the service. Some apps even try to guilt you, saying they’re helping “vulnerable people” with the money. Sure, they’re not gonna break your kneecaps or repo your car, but these companies are still laughing all the way to your bank.
One home health aide in Texas pays a day-and-a-half of work per month in fees. She didn’t know about the free option to transfer money immediately instead of one to three days — these apps make it hard to find on purpose.
My (free) tips to avoid the trap
Between layoffs and inflation, it’s been a tough few years for working families. Before you get caught in the lending cycle, consider your options:
- Request a date change: As long as you’re not in default, you can request a due date change for your credit card, utilities and other bills. Change them to align with your paydays so you always have enough cash in the bank. You can do it in your online credit card portal or call customer service for help.
- Consider friends or family first: I know it’s uncomfortable, but I bet they won’t charge you 400% interest. Admitting that you’re struggling financially can help others help you before you’re in too deep.
- Call 211: Their nonprofit hotline can help you find local or federal assistance programs. You can also chat with them online or search their database of programs here.
You’re reading this article, so you’re already savvy — but if you know someone who needs to hear this, please share it with them. You’ll save them a world of hurt.