CONSUMER REPORTS — Terry Patterson needed to make a last second trip to see his dad last summer. The only problem was, he didn’t have enough money.
So, Terry downloaded a paycheck advance app on his phone and took a $50 cash advance from his upcoming paycheck.
“When I was able to get that done, I had enough money to at least cover one of the.. you know some gas along the way, a couple snacks,” Patterson said.
Paycheck advance apps allow you to request some portion of your next paycheck before payday, usually for a fee or subscription cost ranging between $1-10. Then on payday, the advance is recouped by debiting the money from your bank account or directly from your paycheck.
It sounds easy enough, but be careful you don’t overdo it.
“These services can be great to help you out of a jam once and awhile. But you have to really be careful not to make it a regular habit. If you end up using these services regularly, the fees you pay can add up,” said Octavio Blanco of Consumer Reports.
Research has shown that people who use these apps tend to take out advances regularly, that means they sometimes end up in a vicious cycle of borrowing. So, if you find yourself coming up short in paying the bills every month, consider looking for a bank or credit union that offers short-term small dollar lending services.
“The APR on these loans generally don’t exceed 36%, and they can also help you build your credit,” Blanco said.
As for Patterson, he found using a paycheck advance app really useful but would not make it a regular habit.
“Cash advance situations can always have high credit problems and you want to be very fiscally responsible when you’re looking at any of these types of things,” Patterson added.