Payday Advance Apps 101: What Are They & How Do They Work?

Taylor Carson-Wisor
December 22, 2020

Payday advance or pay advance apps are apps that will advance you or allow you to borrow money before your payday, based upon the amount they predict you should have earned up to that point. The apps predict how much and the timing of what you earn based on bank, location, and employer data. The advances usually start at around $100 and using the advance feature normally requires a membership, tipping, or has associated fees.

Payday advance apps can easily be confused with payday loan apps, cash advances, or payday loans. While you can get money advanced to you from payday advance apps, payday advance apps do not consider themselves a loan and do not follow normal federal and state regulations on payday lending. In addition, payday advance apps do not build credit history so you won’t improve your credit score. In comparison, payday loan companies and payday loan alternatives like Possible follow all state and federal regulations, report APRs (annual percentage rate) and fees to the consumer according to the Truth in Lending Act (TILA), and build credit history by reporting payments to the credit bureaus.

Applying for a payday advance app

Normally payday advance apps require their customers to connect their bank accounts, usually a checking account and not a savings account, to the application in order to monitor historical bank data across linked user bank accounts. This serves the purpose of creating a reliable estimation of the customer’s pay dates and average earnings from their employer. Anyone looking to take out a payday advance with one of these applications will need to have a bank account that has several months of user history typically a minimum of three months. These advance providers usually will not offer a payday advance unless there has been more than at least two paychecks from the customer’s current place of employment. The application process can be more difficult for potential customers who work in the gig economy or other forms of employment where it can be difficult for an algorithm to detect consistently timed payment dates from their employer. Potential customers should also be aware that payday advance app algorithms search for historic behavioral patterns when their pay date last arrived and you may be denied if they have figured out that you have a pattern of spending their paycheck immediately upon receiving them or have lots of debt payments in your transaction history. 

Costs of using a payday advance app

The charges a customer might encounter will vary depending on the cash advance app the customer chooses to apply with. Some payday advance providers like Earnin elect to charge no interest, and opt for customers to provide optional money amounts in addition to their loan amount as a way to “pay it forward.” Apps like Earnin have their benefits but they are not as widely available to people as other online payday loan apps might be. Other paycheck advance providers like Brigit or Dave charge a membership fee or add additional fees based on instant transfer of money and other features and services.

Tips, membership fees or other charges are not disclosed in the form of an APR with customary loan disclosures due to existing loopholes and gray areas of regulations. For example, the American Banker found that suggested tips on the Earnin app can equate to a 730% APR, higher than payday loans online and much higher than loan providers such as Possible with a 150-20% annual percentage rate (APR). That’s one reason Earnin has been subpoenaed by New York State Regulators according to a recent New York Post story. New York regulators have concerns that payday advance apps are skirting state lending laws by acting as a lender while not complying with regulations lenders are under.

In contrast, payday loan apps, payday alternatives and payday lenders charge an interest rate or finance charge when disbursing the quick cash that could be within the $15 – $20 per $100 range. Loans with Possible have a similar and oftentimes cheaper fee system but our customers have multiple pay periods to repay, allowing for greater flexibility and for consumers to build credit history with the hope of improving your credit score.

Possible has no hidden fees, tips, or subscription fees.

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Benefits of using a payday advance app

Even with the costs, there are many benefits of using a cash advance app. Please do your own research before selecting the loan app or financial solution for you.

  • It usually takes 1 day or less to receive money
  • 24 hour access to request money
  • Option to avoid high short term loan fees, especially if you don’t tip or have any associated fees with getting the payday advance
  • Access to additional financial protection such as overdraft fee protection
  • Similar to no credit check loans, usually no credit check and no minimum credit score – therefore, no credit or poor credit is OK

Overview of the Earnin Cash App

No Interest

Earnin allows its users to cash out up to $100 a day and up to $500 per paycheck period. There are no up-front interest charges to get your paycheck early. Instead, Earnin allows users to “tip” what they believe is fair as they repay their loan amount in what the app calls a “pay-it-forward” model. To use the app before payday, all you have to do is connect your bank account and add your employment info. After you set up your account, you’ll have to upload copies of your timesheets or enroll in Automatic Earnings to have Earnin track your hours automatically, using your phone’s GPS to determine when you’re at work, which can raise some concerns about geo-location privacy. That said, Earnin is relatively secure in that they use 256-bit encryption technology which ensures a strong internal safeguard for the privacy and security of users’ bank account information.

Additional Features

Earnin also offers optional features like "Balance Shield" which provides financial protection to the users by preventing their bank account from being overdrawn. Another optional add-on is Health Aid, wherein users can submit medical billing information, have the Earnin team negotiate with their doctor’s billing office to reduce the balance and set up a favorable monthly payment plan. For this service, users can choose a flat dollar additional fee in repayment for the service.

One caveat that comes with Earnin is that it is available to smaller customer bases than the other apps. If you are a freelancer, independent contractor, or are currently working multiple jobs, you likely won’t be able to use Earnin’s services. Earnin is typically only available to salaried, hourly, and on-demand employees like Uber, Postmates, or Lyft employees. Most of the other payday loan apps are available to those with lower wages and lower credit scores as that is the customer base that uses payday loans the most. If you fall into that category, you may have a more difficult time getting a personal loan at Earnin than somewhere else. 

As with other payday loan apps, the starting dollar amount you can advance is usually low ($100). Over time as the app learns your habits and you have advance repayment history, you may be allowed to advance more money. Note that payday advance apps do not build credit history. Even with a successful history of repaying your advance, Earnin does not report your on-time payments to the credit bureaus.

Overview of the Dave app

Financial Fairness

Dave allows users to get a payday advance of up to one hundred dollars, with no interest or credit checks required as part of their cash advance agreement. Users tip the amount of money they believe is fair as part of their paycheck repayment program and similar to Earnin, users must connect their bank accounts or create a checking account with Dave, and prove employment patterns as part of advance eligibility. Ideally, you also have direct deposit from your employer to directly send your cash into the active checking account you have linked.

Dave may not be ideal if you need immediate money and are currently cash strapped, as they charge additional costs for faster fund delivery. With Dave, you have two delivery options for your paycheck— standard or express. The standard option takes from one business day to three business days to deliver the advance to your checking account, but is free to use as a member of Dave. The express option for your paycheck can be delivered to your debit card within eight hours, but will cost a small fee of $4.99. 

Security Features

Dave also has some neat additional financial services features that’ll cost you an additional $1 / month. You can elect to have Dave monitor your finances and alert you if you are nearing a bank overdraft. Since overdraft fees typically cost somewhere in the range of $35, for potential customers who frequently run into overdraft issues with their banks, Dave could be a useful financial protection method for those who overdraft their accounts often. Dave uses 2048-bit encryption to protect the transmission of customer data. They don’t store bank login information and they also hire external security teams to run assessments that discover and allow their teams to fix flaws that could lead to stolen data. Lastly, for the socially conscious, Dave donates a percentage of tips to Trees for the Future, a non-profit which provides families in Sub-Saharan Africa with sustainable food sources, livestock feed, products to sell, and fuelwood through the planting of trees.

As with other payday advance apps, the starting money amount advanced will be lower than the amount you can borrow through a payday loan, speedy cash advance, or payday loan alternative like Possible. Dave will really only let you get a loan of $25, $50, or $75. If you are in need of more funds than this, Dave might not be the payday app for you. Note that similar to Earnin, even with a successful history showing you repay your advances, Dave does not report your on-time payments to the credit bureaus. Lastly, watch out for those instant fund fees. If you use 4-5 advances per month, those fees can really add up!

Overview of the Brigit app

Brigit is a payday lender that allows its users to get a payday advance of their paycheck of up to $250 with no interest charges or credit checks required. Like Dave and Earnin, the starting paycheck advance is usually closer to $100. The Brigit loan app is free to use and includes budgeting and account monitoring tools to help users manage their money with their linked bank accounts, usually a checking account. The app is also very intuitive and easy to navigate around. 

Instant Funding

For a $9.99/month subscription fee, Brigit will also provide its users with instant cash transfers via the debit system, no-cost repayment extensions, and automated cash advance plus a nominal $9 fee if the user is nearing an overdraft. Brigit does not analyze user credit information and has no effect on their customers’ credit score, positive or negative. Brigit uses 256 bit encryption to protect stored user data on their servers. Along with this security, you do not need to even give your social security to Brigit upon signup. If you are a user that does not trust other people or other institutions with your information, Brigit could be a great alternative. High bit encryption and no need to input your social security make Brigit an all-around secure platform to get a payday advance on. 

An additional benefit of the Brigit app is that there are no additional fees aside from the monthly subscription cost; however, by that same token the downside of Brigit is that you will pay the monthly subscription cost as an active member whether you need a payday advance or use its services are not.

As with other payday advance apps, the starting dollar amount advanced will be lower than the amount you can borrow through a payday loan or other short-term financial lender. You also won’t be able to build credit history like a credit-builder loan with Possible, such as our installment loans. As with Dave and Earnin, Brigit does not disclose APR or the interest rate because they don’t operate under federal or state loan regulations since they are considered a payday advance, not a loan. If you are genuinely in need of a larger amount of money and don’t want to pay the monthly subscription to have access to personal loans, Brigit might not be for you. Possible offers loans that are larger and oftentimes show up in your account just as fast as Brigit. 

Overview of MoneyLion App

Similar to Brigit and many of these other companies, MoneyLion is a company that allows you to get a paycheck advance of up to $250 every single pay period. With MoneyLion’s “Instacash” feature, you can get up to 30% of your direct deposit amount from your work paycheck. Every pay period, you can request funds from MoneyLion that come directly out of your paycheck. If you use MoneyLion’s checking account for these paycheck advances, you can request ip to $250, or $200 if you are using a different bank. There is no interest or tips that are required, but if you want your money to come instantly, it will cost you about $3 or $4 a month to have access to this feature. 

While MoneyLion can help get the money you need, many users have many complaints about poor customer service from MoneyLion. MoneyLion also faced legal action in 2018, resulting in them being forced to pay about $2 million to borrowers in Virginia. MoneyLion is known to be trustworthy, but it is good to keep these things in perspective when choosing between companies to get money from. 

No Credit Check 

If you have poor credit, there’s a high chance that your loan or cash advance applications have been turned down at some point. With MoneyLion, you do not need to worry about this happening. MoneyLion does not pull any credit checks on your account when getting you set up with their “instacash” cash advance.  No more getting your money denied from you because of your bad credit! 

However, while MoneyLion does not check your credit or hurt your credit in the process of getting a cash advance from them, they may do so if you are getting a payday loan with them. The payday loans with MoneyLion build your credit up overtime, so it could make getting one of these loans worth it. While their loans boost your credit, companies like Possible Finance report your payments to the credit bureaus quicker and allow you to get a larger portion of your money upfront. If you are in need of more money and sooner, MoneyLion may not be the best place for you. 

Additional Features 

MoneyLion is home to plenty of features to go along with their Instacash feature. In a way, MoneyLion almost acts like a mobile bank with the amount of features they have. For example, you can have access to mobile banking like online checking accounts as well as debit cards that earn you rewards. MoneyLion accounts are FDIC insured, so you know that your money is safe. 

If you like to have all of your accounts and debit cards and credit cards in the same place, doing so with MoneyLion could be a good move. They have many of the products and other features that online banks have. They even have automated investing and finance tracking too if you are looking for that. 

Overview of the Chime App

Chime is one of the biggest names in the online banking realm. Chime is arguably one of the more established companies in this list, and can offer you more than most of these other names in terms of online banking and additional features. While Chime does not directly have a payday loan service, they have payday advance features. 

Payday Advance 

Chimes payday advance lets you get an advance prior to your payday. Like Dave and Earnin, you pay back this advance on your next payday after your advance. If you need money quickly right before your paycheck, this is an awesome feature with Chime that could really help you out. 

Similarly, if you want to get your paycheck a few days in advance, Chime allows you to do this as well. You can get your money up to 2 days in advance with this feature. Unfortunately, if you need a part of your paycheck more than 2 days in advance of your payday but you aren’t looking to get a payday advance, you may be out of luck when it comes to Chime. 

Additional Features 

More than any of these other apps, Chime works best as an online bank. You can completely switch over everything to Chime if you choose to do so, as Chime has plenty of features that will allow you to do this. 

For example, you can open a “savings account”, “spending account”, or “credit building account” with Chime. With these accounts, you can open various debit and credit cards to give you access to money and other financial products. Similarly, Chime has no hidden fees and no overdraft fees. It also has some great features to automatically save some of your money for you over time. Chime works great as a mobile banking app and could make it worth your time to switch your accounts over if you are falling in love with their payday advance feature. Check it out!

Overview of Branch app

Branch is a popular payday alternative app that offers payday advances to their customers. Similar to many of these apps, you can get your paycheck about two days earlier than it would normally show up in your account. Like many of the other payday advance apps, Branch also offers many other services as well. Branch offers a unique product for companies to give their workers a "Branch Card" that allows their employees to get paid instantly. Similarly, they provide a savings education program along with an auto-budget feature that allows workers to better handle their finances and plan for their life ahead.

Limited advancements, but great for companies

Something that may give Branch a slight disadvantage compared to its counterparts is that you cannot get as much as an advance as you may think. Branch claims that you can access up to 50% of your wages earlier than they would normally be in your account. However, this is part of the instant pay feature and will cost you $4 a month. However, unless you plan on frequently getting cash advances with Branch or see yourself continually needing to access your paycheck early, you might not need to pay $48 a year to have access to this service.

Since most of the customers using this payday advance feature will likely be using the free service, Branch falls in line with many of the other apps. You can get up to $500 in advance every pay period. With the free service, you can get up to $150 a day. When initiating this payday advance, you will get your money sometime within the next few days. Since payday advances can help you get your paycheck money in a time of need, you'll want your money as quickly as possible. Not knowing exactly when it's going to come or your money coming a few days later than you expected can leave out to dry.

Despite not separating itself with its payday advance feature, Branch is probably the best app of this list for companies and their employees to use. Companies can work with Branch to give their employees cards that allow them to get paid instantly; according to Branch, having access to wages is the #1 benefit that workers want when applying for jobs. If this applies to you, working for an employer that works with Branch could be great for you.

Possible builds credit history

Unlike payday advance apps, Possible Finance loans also allow customers to build their credit. Once approved, we report the status of your loan to the credit bureaus which can help build credit history. We call these loans credit builder loans. As a direct lender, we also don’t require that potential customers receive income on a consistent bi-weekly schedule, as long as the connected bank account, usually a checking account, is currently receiving income. This allows us to support gig economy workers and recent hires. Lastly, applicants can get loan approval  approved up to $500 (varies by state) on even their first loan application, a higher dollar amount than most payday advance apps.

What if you can’t pay back a payday advance app?

Failure to pay a payday advance app back may result in being banned from the app and from using the payday advance app again. However, the payday advance app will continue trying to withdraw money from your bank account which could cause overdraft fees to stack up. Therefore, if you plan on not paying back the payday advance app, you’ll need to also disconnect your bank account or tell your bank to stop ACH withdrawals on your account to prevent overdraft fees and payday advance apps from overdrafting your account. Of course, if you don’t plan on paying the payday loan back, don’t take the payday advance in the first place. Lots of debt through short-term small-dollar loans, title loans, and credit cards combined with NSF fees from overdrawn bank accounts due to these apps can put you in a tough financial situation.

At Possible, we believe that paying back our loans are much easier for our customers than traditional payday lenders. Along with lower APR than many of these other lenders, we offer our customers the ability to extend their payments if they are struggling with them. Right within our app you can extend your payment up to 29 days without any knock to your credit. 

How secure are payday advance apps?

While customers may be concerned about potential privacy issues by linking their bank accounts with payday advance apps, the industry of bank-linking aggregators has established an early reputation of competence through enforcement of access controls, routine security testing, and rigorous encryption standards. Business experts and technology professions acknowledge that the bank linking industry faces the dual issue of having to compete with the big banks, and having razor-slim margins for error with security, as a single breach would permanently erode customer trust and relegate the offender to the margins of the industry. The banking industry on the other hand has argued that the dangers of bank aggregators ``include potential vulnerability to cyber fraud, unauthorized transactions and identity theft… A key risk is that the aggregators could be storing all consumer financial information or security credentials in one place, creating a new and heightened security risk for consumers.”

Final Take

In theory, payday advance apps or pay advance apps are useful to those who run into timing problems due to large bills, like mortgage and rent, which come due a few days before their paycheck clears. Getting an online payday advance through an app can be less costly than taking out a payday loan, cash advance, or paying overdraft fees. While the usefulness of these advances can vary based on the terms of the app, the way it is used, and how much the membership fees and tips come out to in terms of APRs, they are potential tools that can solve immediate cash problems. For more transparency and longer term financial health, getting a loan from Possiblemay be the right solution. Because Possible is regulated by federal and state regulations, all interest and fees are shown to the consumer upfront. And Possible is significantly cheaper than payday loans and many payday advance apps at 150-200% APR, more flexible in repayment terms (up to multiple months), and builds credit history by reporting to Experian and TransUnion. Getting a payday loan or installment loan with Possible instead of with other payday apps could end up being easier to build off than these other loans, as well as building your credit at the same time. Please do your own due diligence to determine the best solution for your situation.

Taylor Carson-Wisor

Tay enjoys nonfiction writing, having formerly been a contributing member on a policy research consulting team and having worked on political talking points for candidates for public office. His passion for financial fairness and advocating for underserved communities inspires him to write for Possible.

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