SAN ANTONIO – When Terry Patterson needed quick, emergency cash to go visit his dad, he turned to a paycheck advance app.
He downloaded it on his phone and took a $50 advance from his upcoming paycheck.
“When I was able to get that done, I had enough money to at least cover some of the gas along the way and a couple of snacks,” he said.
Paycheck advance apps are gaining popularity as an alternative to a payday lender that often involve exhorbitant interest rates. Paycheck advance apps allow you to request some 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 recouped by taking the money out of your bank account or your paycheck.
It sounds easy enough, but Consumer Reports has a warning.
“These services can be great to help you out of a jam once in a while, but you really have to be careful not to make it a regular habit,” said Consumer Reports’ Octavo Blanco. “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 end up in a vicious cycle of borrowing.
MoneyLion says its app helps its members pay their bills and avoid overdraft fees and gives them greater control over their finances.
There are other options. If you’re coming up short in paying bills every month, Consumer Reports suggests looking for a bank or credit union that offers short-term small-dollar loans. The APR generally does not exceed 36% and can help build credit.