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Benefits, dangers of paycheck advance applications

While these apps can be useful in certain situations, Consumer Reports cautions that there are potential drawbacks you should be aware of.

ST. LOUIS – Do you need money quickly? No need to go to a bank or a payday lender. Paycheck Advance smartphone apps are growing in popularity as a way to get cash fast when you’re in trouble.

While these apps can be useful in certain situations, Consumer Reports cautions that there are potential drawbacks you should be aware of.

Paycheck advance apps allow you to claim a portion of your next paycheck before payday, and there is usually a fee or subscription fee ranging from $ 1 to $ 10. Then, on payday, the advance is collected by debiting the money from your bank account or directly from your paycheck.

These services can be great in helping you get out of a traffic jam here and there. But you have to be careful not to make it a habit. If you end up using these services regularly, the fees you pay can add up.

Research has shown that people who use these apps tend to take cash advances on a regular basis. And because the apps are widely used by minimum wage workers, it means they sometimes end up in a vicious cycle of borrowing.

So, if you are having trouble paying your bills each month, consider finding a bank or credit union that offers short term loan services for small dollars. The APR on these loans is usually no more than 36%, and they can also help you build your credit.

Cash advance situations can always have high credit issues, and you want to be very tax-responsible when looking at any of these types of things.

MoneyLion tells Consumer Reports that its app helps members pay their bills and avoid overdraft fees, and gives them better control over their finances.

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