Canyon Financial, your second chance finance specialist

Visit one of our 5 convenient locations

Blog

All You Need To Know About Cash Advance Apps

You’ve seen the commercials… “Rent is due today but you don’t get paid until next week. How are you going to make ends meet?! With the Earnin app, users can request up to $100/day ($500/week) from their next paycheck to help bridge the gap between your current expenses and your next payday.”

Sound familiar? Cash advance apps are essentially Payday loans dressed in sheep’s clothing – with names such as Earnin, Money Lion, Dave, Branch, and more. Read below to learn the good, the bad and the ugly of cash advance apps – the temporary solution that allows you to cash out your check before your next payday.

Before considering one of these apps (or applying for a payday loan), be sure to check out Canyon Financials’ services. We are here to assist you in your unique situation. We believe that each and every loan requires a personalized touch to ensure our customers are getting exactly what they need to succeed.

What Are Cash Advance Apps?

These smartphone applications have become a trending “solution” for many consumers by providing you access to money you are working to earn. Most of these apps entice people with things like little-to-no service fees to help sweeten the deal. Sound good? In theory, it is an incredible concept! You’re working to earn that money; therefore, you should have access to it whenever you want or need it. Right? The danger is failing to recognize how easy (and how dependent) you can become on borrowing against your future-income.

The “Good”

The only good thing about these apps is that they are free to download.

The Bad

Cash advance apps tend to promise you some pretty incredible things! No late fees. Zero-interest. Quick access to the money you’re working to earn (in case of an emergency). Right off the bat, this sounds like an incredible deal…But is it really?

While these apps openly promote how easy it is to borrow money, it’s what they don’t tell you that’s bad. First, almost all of these apps require you to have a bank account and provide access to that account. Sounds easy enough; however, your account has to be at a supported bank. Second, many of them require you to provide some sort of employment tracking so they can track how much and how often you are working. This may mean you have to be employed at one physical location, or have an electronic time management system. Third, virtually all of them have strict limits on how much you can borrow.

You know that potato chip commercial that uses the slogan, “Bet you can’t eat just one!”? It’s the same premise with borrowing against your potential future earnings. I use the phrase “potential future earnings,” because money that’s not already in your wallet or bank account hasn’t really been earned yet. If you’re one of the few who can use the app once or twice in your entire life, then it certainly APPEARS to be FREE! Unfortunately, the majority of consumers that are taking advantage of these apps are doing so on a regular basis. The term used for this habit is “chronic early spending”.

Here’s where chronic early spending comes into play. You need to borrow $300 to pay rent, so you download one of these quick and easy cash lending apps. Next time you receive your paycheck it’s $300 short; because naturally, they are going to draw that $300 out of your account as soon as your paycheck hits. You take a deep breath because you know that your rent has been paid and you have the rest of your paycheck to get your through the rest of the month… until rent comes due and you’re $300 short again. And so, the viscous cycle begins! Eventually, something else comes up and you don’t have the money to cover the entire amount of your quick app loan, so you do what you have to do and pay additional fees to extend the life of the loan and then promise yourself you’ll pay it off, next time.

Let’s say you’re one of those individuals that may only need to borrow from one of these apps (like Earnin) just one single time. You borrow $100 for a period of two weeks because they only ask for a tip (if you desire to give one). You tip them a generous $9 for the service; however, the minute you tip them two things happen. First, you’ve just paid to borrow money that would be yours in just a few days. Second, if you amortize your tip over a two-week period, you’ve now paid the equivalent of 400 percent in interest. But wait, there’s more! If you choose NOT to tip, it can drastically affect the amount of money you’re able to cash out each week. This can be detrimental to the person who has been borrowing $300/week to cover living expenses if/when they suddenly get knocked down to only $100/week. Can you see how this can get complicated rather quickly?

So how could this ever truly be considered a good thing? Well, if you are a one-time user looking for emergency cash, then this could potentially act as a legitimate solution for you! But be aware of the risks associated with relying on cash apps for regular day-to-day living; which is, statistically speaking, how a large percentage of users are currently using the app.

The Ugly 

Borrowing on a weekly basis is addicting and can encourage undesirable financial habits. Over 12 million Americans rely on cash advances to make it through the next two weeks. If you were to run a survey right now, roughly 1/5th of Americans would tell you that they could not afford to spend $400 in an emergency situation.

That’s ugly. That’s not a problem revolving around how often you get paid. It spawns from the fact that you don’t make enough money to cover your expenses. A cash advance app isn’t going to save you from these issues in the long run. If anything, it will likely transform you into an irresponsible borrower with unhealthy spending habits.

The Truth

These apps prey on low-income consumers that are living paycheck-to-paycheck. They strive to push users into becoming habitual borrowers so they can rely on weekly tips and/or any additional fees you may be paying to get your money, ASAP. A better solution would be sitting down with a trusted financial advisor and creating a budget that cuts expenses and maximizes your income and rainy-day fund. If you’re truly experiencing an emergency but have some time to provide for it, consider a secured personal loan through Canyon Financial.

Earn in takes the necessary steps to ensure that they are going to be paid back. That being said, their terms say that they will never seek to collect on a debt that hasn’t been paid back. How does a company like this make any money to stay in business? They make their money on the back end. You see, you provide them all sorts of valuable – yet extremely personal – information. Information they then sell to other companies. These apps are tracking your income, your employment, and your spending habits. This information is highly sought after by other companies who then use it to market other products to you. Canyon Financial prides itself on being a relationship lender and will never sell your information. We value our customers’ privacy.

Should you find yourself in a financial pinch – before racing to download a quick cash app, pick up the phone and call a trusted financial advisor from one of Canyon Financials’ five locations.

Offering honest, fast, and friendly service, Canyon Financial is known for being radically transparent and open to give you peace of mind as you begin the financing process.

So What Do You Do?

Credit cards are dangerous and if you only get paid every two weeks, where does your security net come from? These apps feed off the people that are living paycheck-to-paycheck by attempting to give them some sense of security. If used properly, it can be a useful way to cash out on your earnings for emergency situations, but reports show that users who start using the app for an emergency purchase are now regularly borrowing against their paychecks in an effort to make it to the end of the week.

The first step is to focus on establishing a fully funded savings or “rainy day” account. Don’t attempt to replace healthy financial habits with a temporary fix. There is light at the end of the tunnel! Contact a certified banker at Canyon Financial today for more information on how you can take back control of your finances.

Locations