While services can be a good option for workers with limited access to emergency cash, they can present dangers when overused.
“These apps seem to be a good tool for people who have bills to pay before receiving their paycheck,” says Patrick Bernard Washington, PhD, associate professor of finance at Morehouse College. “Workers earning low wages may have an emergency for which they need a loan to resolve the problem. However, it is still a loan against income which may not be a living wage. “
Ted Rossman, Industry Analyst at CreditCards.com and Bankrate.com, says “Earned Payroll Apps may work for some people from time to time, but you definitely shouldn’t make it a habit.”
“At the end of the day,” he adds, “if the need for additional funds occurs on a regular basis, you have to find ways to earn more and / or spend less. “
But industry leaders say these products can help users avoid traditional payday loans, vehicle title loans, black market lenders, pawn shops, and other potentially dangerous sources of money. emergency.
They can also help users avoid overdraft fees, which Bankrate.com says tends to cost around $ 34 per person.
“Overdraft fees only affect people in difficulty,” said Ram Palaniappan, CEO of Earnin. “To a large extent, our clients tell us that they are saving $ 50 per month in overdraft fees. It’s a lot for our clients, it’s like half a day’s work going to the bank.
“MoneyLion’s Instacash helps our members pay their bills on time, cover unforeseen expenses and avoid costly overdraft fees,” a company spokesperson told Consumer Reports. “Our members tell us that the service gives them more control over their money, makes them feel less stressed about their financial situation, and helps them achieve their financial goals.”