Paycheck advance apps: What to know before you download
by Annie Millerbernd Of Nerdwallet, The Associated Press
Posted May 19, 2021 7:00 am EDT
Last Updated May 19, 2021 at 7:11 am EDT
Paycheck advance apps let users borrow a small amount of their expected earnings, usually in exchange for a small fee, and repay it on their next payday.
It seems like an attractive offer if you need extra cash between paychecks, and millions of users have accepted it. While it’s possible to use these apps without harming your finances, some consumer advocates say they can lead to a cycle of debt.
If you’re thinking of using a paycheck advance app, here’s what to know before you download.
To participate in the program, the companies must agree to launch an effort addressing emergency savings within a year and share anonymized data of results from those efforts with the initiative. In return, they gain access to the expertise BlackRock provides through partners such as Common Cents Lab, Commonwealth and Financial Health Network.
A recent Capitol Hill hearing on retirement security highlighted on key hurdle to increasing long-term savings: People tend to withdraw money from their retirement accounts to pay for short-term emergencies.
A 2018 Federal Reserve report found that 40% of Americans would have difficulty paying for an unexpected $400 expense. A survey released by Bankrate.com in January indicates that those cash reserves still fall short for many people, with only 39% of people able to pay for a $1,000 emergency expense out of savings.
Some people have not recovered from economic losses caused by the pandemic and need help from employers, retirement plan providers and other sources to build a financial cushion.
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