Billions borrowed through payday advance apps :: WRAL.com
Raleigh, North Carolina – When money is tight, a paycheck advance app can help – at a cost.
Terry Patterson downloaded MoneyLion last summer when he had to take a last minute trip to see his father.
He got a $ 50 advance on his next paycheck.
“When I was able to do that I had enough money to at least cover one of the, you know, gas along the way. [and] some snacks, ”Patterson said.
The apps allow users to request a portion of their next paycheck. There is usually a fee or subscription fee, which can range from $ 1 to $ 10.
On payday, the application is refunded by debit from a bank account or the money is taken directly from your paycheck.
The industry is exploding.
In 2018, there were almost 19 million payday advances, for a total of $ 3.2 billion. Last year there were almost 56 million advances, totaling $ 9.5 billion.
“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, ”says Octavio Blanco, with Consumer Reports.
Research shows that users tend to take out regular advances, and many are caught in a borrowing cycle.
Those who find themselves running out of bills each month need to consolidate their finances, according to Consumer Reports.
In the meantime, according to Consumer Reports, people might be better off trying a short-term loan from a bank or credit union.
Interest rates can reach 36%. But a loan that you pay off on time can help build your credit.
MoneyLion tells Consumer Reports that its app helps members pay their bills and avoid overdraft fees, and gives them better control over their finances.
As with everything else, there are pros and cons. Users just need to be careful.