Payday Loan Apps 101
Finneas Fish is back with the first installment of “Loan Shark Week(ly)” to give you the rundown on Earned Wage Access (EWA) apps. They’re everywhere right now, promising workers “access to your own money, just earlier.” But behind the friendly mascots and payday push notifications lies something we’ve seen before: the payday loan, repackaged for your smartphone.
These apps advance part of your paycheck before payday, then automatically pull repayment, plus fees and even “tips,” right out of your account when you get paid. Marketed as financial empowerment, these products profit off people already struggling to make ends meet.
Here’s what’s really happening:
- It’s a loan, not a benefit. Apps advance money with the expectation of repayment and fees. That’s a loan, plain and simple.
- They get paid first. Lenders have direct access to your paycheck or bank account, whether through your employer or their app.
- It’s not for emergencies. Research shows these loans are used most often for basic needs like rent, groceries, and gas, not one-time crises (pg. 5 CRL Report).
- The cycle continues. Frequent borrowing and hidden costs keep users stuck in recurring debt, payday after payday.
The problem isn’t workers wanting access to their wages. The problem is an economy where 60 percent of Americans live paycheck to paycheck, and billion-dollar lenders see that as a business opportunity.
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