SAN ANTONIO – When Terry Patterson needed emergency money to visit his father, he turned to a paycheck advance application.
He downloaded it to his phone and took a $ 50 advance on his next paycheck.
“When I was able to do that, I had enough money to at least cover some of the gas along the way and some snacks,” he said.
Payday advance applications are gaining popularity as an alternative to a payday lender that often involves exorbitant interest rates. Paycheck advance apps allow you to request a portion of your next paycheck before payday, typically for a free or subscription cost ranging from $ 1 to $ 10. Then on payday, the advance is collected by withdrawing the money from your bank account or paycheck.
It sounds easy enough, but Consumer Reports has a caveat.
“These services can be great in helping you get out of a traffic jam every now and then, but you really have to be careful not to make it a regular habit,” said Octavo Blanco of Consumer Reports. “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 regular advances and can sometimes find themselves in a vicious cycle of borrowing.
MoneyLion says its app helps members pay their bills and avoid overdraft fees, and gives them better control over their finances.
There are other options. If you are having trouble paying your bills each month, Consumer Reports suggests looking for a bank or credit union that offers short-term loans. The APR usually doesn’t exceed 36% and can help build credit.
Copyright 2021 by KSAT – All rights reserved.