How many times have you wished you could get paid today, when payday is actually 1 week away? Millions of people take advantage of Mobile Money Apps which can be mildly helpful to use in a pinch. It can also become a slippery slope, when a pinch turns into dependence. Follow me for a second…

Fintech Apps?? Have you heard of these companies, or better yet do you own one of these apps on your phone…trust me when I say this will always be a no judgment zone, so no shame if you do. These Mobile Apps state they are offer financial freedom and instant gratification with one quick click. Not only can you open deposit accounts and get paid early, you can invest, or even borrow money to “cover you to your next pay.”

We all know the perils of payday lending. Over the years there have been laws enacted to protect consumers from predatory loans. While many of my client’s use these apps and enjoy the benefits and flexibility, I remind them when it comes to the payday advances, if you didn’t have the funds to cover expenses last pay…why are you borrowing against your next pay?

The mobile apps repayment agreement is to “Pay us what’s fair” which allows you to decide how much you want tip for the advance you receive. However, if your tip is below platform standards, your approval dollar amount will decrease.

So, say you decide to pay a 10% tip on a $100 cash out ($10). It will only cost you $110 on your payday. Not too bad, huh? Whelp, here is that slippery slope I mentioned earlier…Let’s say you borrowed $100, 2 weeks before your next pay day. That same $10 is equal to a 300.26% APR.

Fintech Apps onetime fee (per $ amount borrowed) and no compound interest, makes it a much better option than traditional payday loans. Yet if not used responsibly, it can lead to that axiomatic treadmill of debt that many traditional payday users find so hard to get out from under.

Recognizing most people have more than one of these apps on their phone leads me to believe they are borrowing from more than just one lender. How is anyone able to maintain a budget and get out of debt in this type of lending environment??

As a Financial Wellness Coach, this question disquiets me. My tip is to watch your budget, save as much as you can, and if you have to use these apps, use them thriftily. You have financial goals to achieve and you can’t do that if $575.00 + tips are being deducted from your pay every 2 weeks. Remember, slow motion is still motion. You can start saving today with just $5.00 each payday, letting the compound interest it earns in your credit union savings account help you.

Fintech apps are helpful, informative and I can definitely see the draw to them. Nevertheless keep in mind that fiscal responsibility and great stewardship is needed when borrowing with these companies.