The true cost of cash advance apps
Need money to pay bills in a pinch? Many rely on cash advance apps to make it to their next check. While these services offer a helping hand, you could wind up in a jam if you’re not careful.
A recent study took a deep dive into 15 of today’s most popular cash advance apps. The scoop? An advance might cost more than you bargained (or budgeted) for.
That’ll cost you
The study covered popular cash advance apps on Apple’s App Store and the Google Play Store. They looked at the actual cost of borrowing $100. Fees ranged from $6 to $28, averaging just over $15.
You might think using one of these cash advance apps is better than getting hit with an overdraft fee from your bank. The average penalty for going into the red is about $35, which is more expensive than a cash advance fee. However, there’s no such thing as a free lunch.
To cover their butts, cash advance apps often require access to your checking account, just in case you don’t repay within the given timeframe. In addition to pulling money directly out of your wallet, they’ll also hit you with sky-high interest rates. We’re talking 500% or higher in some cases!
Skeletons in the closet
Online cash advances and payday loans have a historically shady past. Many aren’t licensed to lend in the states they do business with. Unauthorized bank account withdrawals and harassment from debt collectors are common complaints.
Some have tried to take legal action against the worst offenders, only to hit a wall. States can only do so much, as many online cash advance companies aren’t licensed where they do business. They often incorporate offshore or claim they’re affiliated with a Native American tribe to stay under the radar.
The good news is these shady dealers now have the feds’ attention. The Consumer Financial Protection Bureau accepts payday loan complaints and in some cases, caps on interest rates have been imposed.
Many of today’s cash advance apps and services strive to improve by offering overdraft protection and more transparent repayment terms. However, it pays to be cautious. Pun intended.
Proceed with caution
Payday loan ads are all over social media - Here's how they're skirting the rules
It has been a tough few years for many Americans. Unfortunately, trying to stretch every dollar to buy the necessities has become the norm. Some might look into a second or third job to pay the bills.
This is precisely the type of person that payday loans are targeting. Promising quick cash without telling the whole story of the loan costs, these advertisements have been popping up on social media platforms like TikTok.