If you need quick cash to pay a bill, taking out a payday or title loan can mean high interest and fees. Instead, some people are turning to payday advance apps as much cheaper alternatives.
In Texas, payday loans can come with interest as high as 600% a year. Some payday advance apps and online banking services can advance you money on your wages for little to no cost.
One payday advance app, called Earnin, can advance you money before your paycheck arrives.
"Their pitch is they're going to give you up to $100 a day and up to $1,000 a pay period. They're basically giving you your money ahead of time. And the idea is you're going to pay it back once that paycheck arrives," explained Ted Rossman, credit analyst for CreditCards.com.
Earnin doesn't charge any interest or fees. Instead, they ask for a tip.
"They make money off of tips. They suggest you leave a tip. The default is 10% but you can change it to whatever you want, including 0%. But my understanding is about 80% of their users are tipping something," said Rossman.
When your paycheck is direct deposited into your bank account, Earnin then drafts the cash advance back out to reimburse itself.
"They're going to look for things like paystubs and earnings history, they're going to get your checking account information so they can do an automated withdrawal," Rossman added.
A payday advance app like Earnin can help consumers avoid payday loan interest.
"This actually could work once in a while. I think this is one of the better things if you need to do it occasionally. Otherwise, we're talking about something like overdrawing your account, which is going to be typically a $35 fee," said Rossman.
But experts warn not to make any payday advance a habit.
"You don't want to have this habitual action of every single week or every single month you're falling behind. That's where we need to address the behavior as well as the shortfall," said Rossman.
Many of these payday advance apps and online banks offer similar services: Varo, Brigit, Chime, Axos Bank, Dave, MoneyLion, PayActiv, DailyPay, FlexWage, and Branch.
Doughroller summarizes their services here.