Should You Use a Money Advance App for your Holiday Shopping?

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Should You Use a Cash Advance App for Christmas Shopping?
Cash advance apps can provide an increase during the holiday season however, some consumer advocates believe they can create an unending cycle of credit.


Last updated on Oct 19, 2022.

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The cash flow may be squeezed during the holiday season when bills must compete with things like travel and gifts for space on your financial plan.
Paycheck advance apps offer fast cash. They allow you to borrow money from your expected earnings for low or no fees and pay back the loan of your next pay check.
Though that offer may seem appealing to shoppers during the holiday season, consumer advocates and financial experts say these apps could lead to a spiral of credit. Here's what to know about making use of loan apps at this time of year, as well as suggestions for making it through the holidays without borrowing.
The dangers of cash advance apps
It's quick and easy. If you're employed and receive an income stream then you're likely to be eligible in advance.
The majority of apps restrict advances to $200. The amount you can be able to borrow is dependent on your income and expenses. These applications will require you to have access to your banking account to withdraw money for repayment.
The withdrawal could trigger an overdraft fee in the event that you don't have enough money in your account claims Lauren Saunders, associate director of the National Consumer Law Center. Some apps acknowledge this risk in their conditions of service, and state that they'll do their best to avoid causing an overdraft, but they can't guarantee that.
Advances are and come with the same risk, Saunders says. Some borrowers may not be able the full amount of the loan on top of their regular expenses, causing them to fall into an endless cycle of debt.
"People are often short with that hole in their paychecks or their bank account and that pushes them to reborrow," she says.
University of Northern Colorado graduate Michelle Adjei has occasionally used the popular app Earnin to make payments for bills as well as Amazon purchases. Adjei says that her experiences with Earnin was pleasant, but she doesn't recommend using it if you're struggling to meet your basic needs.
"If your intention is to use it for the reason that you're already behind in your studies, you're only going to get worse and it's going to actually likely make things worse for you, since you're constantly looking to catch-up," She says.
How to use cash advance apps safely? cash advance application
Do you think buying a present is good enough reason to apply for an advance? That's up to you, advises Saundra Davis, founder of Sage Financial Solutions, a San Francisco Bay Area-based nonprofit that focuses in financial education. It is possible to use an advance to pay off bills or to purchase gifts but neither is incorrect.
"No person can decide that for you, everyone must make their own decision," she says. "But for you to make a sound decision, you have to understand the choice that your making."
That means figuring out the way the loan application can impact your finances and how it compares to the other alternatives, she says.
Noelle White says she keeps the track of her cash flow, which is why making use of Earnin for a few emergencies hasn't made her not pay any bills.
"When I make use of it, I usually try to ensure that I'm preparing the next one and ensure that the funds are there and that I'm not going into a bad way," she says.
Cash advance applications should be an option only in the last instance, according to Atlanta-based Certified Financial planner Tania Brown. If you do use them she recommends limiting the advance amount to what you'll require and prior to that, deciding what you'll do to manage your expenses on a smaller paycheck.
"If you're at your final destination, you should come up with a dollar amount you won't over, and then make an outline of how you'll pay it off, and then create an outline of how you're going to save," she says.
Other ways to get through the holiday season
It's not ideal to start saving now that the holidays are just around the corner, but Brown suggests there's time to .
She suggests cutting out services or subscriptions that aren't needed, even temporarily, to free up more room in your budget.
A pet sitting or hanging holiday decorations for a neighbor, could also earn you cash, she says.
"There are methods to do this, but it's simply thinking through a different lens," Brown says. "So instead of a borrowing lens, think about an earning and a saving lens."
If the reorganization of your budget isn't enough, consider slimming down your holiday plans. It could be the perfect occasion to speak with family members about whether gifts could be more than physical presents, Davis says.
For example, the gifts she gives her grandkids don't include bows. Instead, she takes them to look at holiday lights or makes craft projects with them.
"Understanding what's really important to you about the time of gift giving is vital," she says. "Would someone you love be in financial distress to give them that gift? I suspect not so much."
Explore other holiday borrowing options



About the author Annie Millerbernd is a personal loans writer. Her writing has been featured on The Associated Press and USA Today.







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