Early access to your paycheck can come at a steep price. There’s a better alternative when you have a cash crunch.

It’s incredibly easy to use payday advance apps— just download an app, link it to your bank account and get early access to your next paycheck—but it’s also an easy way to damage your financial well-being.

Advertised as an easy way to access your paycheck early, payday advance apps are a relatively new financial service. As such, most people do not understand how they work and can easily get burned. Make sure you understand the real costs of these apps before using one.

The real cost of payday advance apps

While some payday advance apps don’t charge interest, their fees are nothing less than exorbitant. For example, a $5 fee to get $100 five days before payday is the equivalent of paying an annual percentage rate of 365%. That’s not a typo. Some apps even ask for tips.

For a user getting an advance every week, that $5 adds up to $260 for the year. For a minimum wage earner, that’s equivalent to 27 hours of work—more if you account for taxes.

Whether the cost of getting early access to your money is framed as fee, interest or a tip, the cost of payday advance apps can be significant.

Another way people can get burned is when the app debits a user’s bank account and their balance is too low to cover the advance, resulting in an overdraft charge.

Less expensive alternatives

For those who may need a little extra help reaching their financial wellness goals, Consumers also partners with GreenPath to provide credit counseling and repair services, including budgeting, improving credit score, debt repayment and more. Please contact us 800-991-2221 to discuss options.

Consumers provides banking services for more than 110,000 members. If you have banking questions, call us at 800-991-2221. We make it easy to bank how you want, when you want.

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