Should You Use a Cash Advance App for Holiday Shopping?

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Should You Use a Money Advance App for your Holiday Shopping?
Cash advance apps offer an opportunity to boost your cash flow during the holidays however, some consumer advocates believe they can lead to an unending cycle of debt.


Updated on October 19, 2022

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Cash flow can be squeezed during the holiday season when bills must compete with items like travel and gifts to find a place in your budget.
Paycheck advance applications provide fast cash. They let you borrow money from your expected earnings for minimal or no cost and pay back the loan of your next pay check.
Although the offer might seem appealing to shoppers during the holiday season Consumer advocates and financial experts warn that the apps can lead to an endless spiral of credit. Here's what to know about making use of loan apps this time of year, as well as strategies to get through the holidays without borrowing.
Dangers of cash advance apps
They're quick and simple. If you're employed and get an income stream then you're likely to be eligible to receive an increase.
The majority of apps limit advances to $200. The amount you can get is determined by your income and expenses. These apps need access to your account at a bank to withdraw money for repayment.
The withdrawal could trigger an overdraft charge when you don't have sufficient funds in your account, claims Lauren Saunders, associate director of the National Consumer Law Center. Certain apps have acknowledged the risk in their terms of service and say they'll try not to cause an overdraft -- but they can't guarantee that.
The advances are and carry the same risks, Saunders says. Some borrowers may not be able to afford the full amount of the loan in addition to their regular expenses, leading them to fall into the cycle of debt.
"People frequently find themselves short of the paycheck or in their account at the bank, and this pushes them to reborrow," she says.
University of Northern Colorado graduate Michelle Adjei has occasionally used one popular app, , to make bill payments and Amazon purchases. Adjei says that her experiences with Earnin was positive, however she doesn't recommend using it if you're struggling to cover necessities.
"If your intention is to use it to help you're already behind in your studies, you're likely to be left behind and this will increase the burden for you since you're constantly trying to catch up," the woman says.
How to use cash advance apps safely? cash advance application
Is buying a gift good enough reason to apply for an advance? That's up to you, suggests Saundra Davis, the founder of Sage Financial Solutions, a San Francisco Bay Area-based nonprofit that focuses on financial coaching. It is possible to use an advance to pay off bills or to purchase gifts, and neither is necessarily wrong.
"No person can decide that for you, everyone is responsible for their own decisions," she says. "But in order to make a sound decision you must be aware of the decision you're making."
This is a way of determining how a loan app will affect your financial position and how it compares to the other alternatives, she says.
Noelle White says she keeps the track of the cash flows in her account, so making use of Earnin to cover a few emergency situations hasn't led her to not pay any bills.
"When I use it, I typically try to ensure that I'm planning the next check and making sure the funds are there and I'm not likely to be in a bad way," she says.
Cash advance apps should be a last resort, says the Atlanta-area accredited Financial planner Tania Brown. If you decide to use one, she suggests limiting the amount of advance to what you'll need, and then deciding ahead of time the best way to handle expenses with an upcoming paycheck.
"If this is your final option, think of an amount that you will not go over, create an outline of the method you'll use to make this payment, then develop an action plan for how you'll be able to save money," she says.
Alternative ways to get through the holiday season
It's not the best time to begin saving now that the holidays are just around the corner, but Brown suggests there's time to .
She suggests cutting down on services or subscriptions that aren't needed, even temporarily, to make space in your budget.
An activity, like pet taking care of your pet or hanging Christmas decorations for your neighbor, could earn you additional cash, she says.
"There are ways to accomplish this, just think through a different lens," Brown says. "So instead of a borrowing lens, think about the earning and savings lens."
If rearranging your budget isn't enough, you might want to reduce your Christmas plans. This could be the opportunity to discuss with your loved ones about whether gifts could be more than gifts that are physical, Davis says.
For instance, the presents she presents her grandchildren don't come with a bow. Instead she lets them see the lights of Christmas or creates crafts with them.
"Understanding what's really important to you about the gift-giving season is crucial," she says. "Would the person that you cherish be in financial distress to buy them that present? I suspect not so much."
Explore other holiday borrowing options



About the writer Annie Millerbernd is an individual loans writer. Her work has appeared on The Associated Press and USA Today.







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