A recent study by Overdraft Apps reveals that cash advance apps have become more costly for consumers in the past six months. The research indicates that borrowing from the 17 most popular cash advance apps now averages $19.08, marking a significant 24% increase in costs compared to April.
This rise is due to fee hikes by several widely-used apps and the growing popularity of newer, more expensive options. These mobile apps are consistently among the most downloaded in the finance category, offering instant access to extra cash without interest or a credit check.
Fees vary widely, with borrowing $100 costing anywhere from $6.00 to $34.99. Varo, Vola, Cleo, and B9 stand out as the low-cost options, charging less than $10 in fees for a $100 loan.
The average cost of borrowing $50 is $14.07, $200 advances have an average cost of $26.95, and $500 advances average $60.78 in fees and tips.
Mitchel Harad, publisher of Overdraft Apps, emphasizes the importance of careful research, given the rising costs and growing popularity of these apps. With varying features, fees, and advance limits, a bit of research and comparison shopping can lead to significant savings.
Navigating cash advance app fees
None of the apps in this study charge interest, and most don't impose late fees. Instead, these apps charge one or more fees:
• Express Fees: Most apps offer the option of delivering funds within minutes, with an optional fee of $3.99 to $11.99 for a $100 advance. However, most apps can transfer money within a few days at no extra cost.
• Monthly Subscription: Some apps require a subscription for cash advance features, with rates ranging from $1 to $19.99 per month. This allows consumers to access multiple advances per month, reducing the effective cost of borrowing.
• Optional Tips: Eight of the 17 apps encourage users to leave an optional tip when requesting a cash advance, often with a pre-selected 15%. Tips can significantly increase the cost of borrowing, with seven of the tip-requesting apps being among the highest-cost options.
However, each of these apps clarifies that tipping doesn't affect borrowing limits. Consumers can save by contributing a small tip or none at all.
Understanding fee structures can lead to substantial savings. For instance, borrowing $100 from Dave ExtraCashTM with a 5% express fee and a 15% optional tip, which is sent to an external bank account, costs $20. Opting for instant access through a Dave Spending Account with no tip reduces the cost to just $3, making it the most cost-effective choice. (Dave also charges a $1 monthly subscription fee.)
Cost calculations for this study are based on publicly available pricing information as of October 13, 2023, and assume one advance per monthly subscription fee, an express delivery fee to an external bank account, and the lower of 15% or the maximum optional tip for apps requesting tips.
For more detailed insights on this cost study and comparisons of cash advance apps, visit https://overdraftapps.com/how-to-borrow-100-instantly/