Early Wage Apps Are a Little Too Much Like Payday Loans

You just tip whatever you think is fair.

But is it really that simple to get paid before your companys designated payday?

There must be a catchsomething to prove that this offer is too good to be true.

The basics of early wage apps

There are two types of early wage access programs.

The first is those that work independently of your employer.

You provide some details about your hourly employment and connect your bank to get a short-term loan.

It says that contributions from the total community keep the app going.

Then, that money is deducted from your next paycheck.

Meanwhile,FlexWageallows early wage access and quicker access to tips and commissions through a Flex Pay debit card.

Some of these services call it a payday advance.

Some tell you that it’s possible for you to pick your own pay day.

Some say youre just getting quicker access to the money you already earned.

Very few of them use the word loan.

But thats essentially what they are.

Sometimes [these apps] get it wrong when they think your paycheck is coming in.

You could be hit with overdraft fees or nonsufficient fund fees, she said.

Despite the ease of using these early wage programs, theyre far from foolproof.

Youve got this hole in your paycheck, but you also need that money.

Then theres the issue of tips, like the ones Earnin encourages.

Earnin isunder investigationin 11 states for concerns that its offering payday loans in disguisewith interest rates to match.

Instates where payday loans are legal, theres sometimes a cap on how much interest lenders can charge.

In New York, for example, the interest rate cannot be more than 25%.

InCalifornia, legislators are pushing to cap early wage access fees at $14 per month.

Butat the federal level, tips make all the difference.

Other options include seekingsmall loansfrom credit unions or checking to see if your bank offersoverdraft lines of credit.

The latter offers a relatively low interest rate on the amount youve overdrawn.

Much like Earnins ad campaign, the traditional loan sharks dont seem to be folding anytime soon.

This post was updated on 8/14/2019 to correct ZayZoons repayment period.