Activehours 2017 Review: Get an Advance on Your Own Paycheck

Loans, Payday Loans, Personal Loans, Personal Loans Reviews

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Activehours is an app that lets you draw small amounts of your check before payday.

Activehours:

  • Doesn’t charge fees or interest. Users can “tip” the app an amount they deem fair, typically between $0 and $14 per withdrawal.
  • Has a $100 daily withdrawal limit. Its pay period withdrawal limit varies by user, but is between $100 and $500.
  • Requires you to enable direct deposit and provide access to your checking account.
  • Can be used by hourly, salaried and on-demand employees. It’s not for independent stay-at-home workers or those who have multiple jobs.

To learn more about whether Activehours is a good fit for you, read on:

What is Activehours?

Is Activehours right for me?

How Activehours works

What you should know about Activehours

What is Activehours?

Activehours is part of a wave of companies that say they provide alternatives to expensive payday loans or racking up high overdraft fees. Companies such as PayActiv, FlexWage and Clearbanc offer similar products.

A two-week pay cycle is hard on those who have to budget every penny, says Ram Palaniappan, CEO of the California-based Activehours. “If they worked today, they should have access to their money today.”

The startup, founded in 2013, is funded by venture capitalists.

The company is committed to a no-fee business model, says Palaniappan. Most users leave a tip, he says, but he declined to provide specifics.

Activehours says Starbucks, Sears, Uber, Instacart and Apple store employees are among the app’s users.

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Is Activehours right for me?

Consumer advocates warn that paying to get your earnings early is not a healthy long-term habit.

“It’s cheaper than a payday loan, but I fear that people get into the habit of spending their wages early and end up paying to access their wages on a regular basis,” says Lauren Saunders, associate director at the National Consumer Law Center.

When used occasionally, Activehours is a useful app if you:

  • Are an on-demand worker whose paycheck varies. If you’re an Uber or Lyft driver, however, both companies offer ways to cash out instantly.
  • Have a checking account and are paid by direct deposit.
  • Don’t want to overdraw your bank account and pay an overdraft fee, typically $34.
  • Don’t want to take out an expensive payday loan. Their annual percentage rates average 391%.

Activehours might not be a good solution for you if you:

  • Are paid by reloadable debit card.
  • Work from home independently or have multiple employers.
  • Regularly spend more than you earn.
  • Use it in place of an emergency fund. (Even saving $250 can help you withstand common financial shocks and avoid using Activehours or payday loans).
  • Don’t have a budget that includes everyday expenses, savings and something for fun.

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How Activehours works

  1. Create a profile on the app and give it access to your checking account. Anyone can download Activehours, but to use it, you must receive your paycheck via direct deposit.
  2. Activehours tracks the hours you work. It does this differently depending on your job:
    • Hourly workers: Upload photos of your daily timesheet or connect the app with your company’s online timesheet system.
    • Salaried workers: The app uses location tracking on your phone to verify that you went to work.
    • On-demand workers: Upload photos of your task receipts, such as a Postmates delivery confirmation or a Grubhub order. Activehours automatically uploads Uber ride receipts.

    You can access money only once you’ve earned it.

  3. When you request money, Activehours verifies your hours worked. The company says this takes about 10 minutes if you submit through the app.
  4. You will receive the money the next business day if you request on a weekday, and on the second business day if you request over the weekend. There’s an option to get the money immediately, but only if your bank supports it.
  5. You can pay a tip, usually between $0 and $14, which Activehours deducts from your paycheck on payday along with the money you withdrew.
  6. Activehours has two withdrawal limits:
    • Daily limit: $100 for all users.
    • Pay period limit: The total amount you can withdraw during your pay period depends on your wages, any bills due and your financial behavior. For example, the app encourages users to spend less than they make, avoid overdrafts and maintain a positive bank balance. All users start with a limit of $100. If your wages are high enough and your financial behavior meets Activehours’ guidelines, your limit can increase to $500.

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What you should know about Activehours

Fees

Activehours doesn’t charge fees and, if you use it sparingly, can be cheaper than overdrawing your account or taking out a payday loan.

But regular tips add up. A $2 tip on a $20 withdrawal due in two weeks is an annual percentage rate of 260%, comparable with the rates that payday lenders charge.

Financial privacy

Activehours requires your checking account information and, if you’re a salaried employee, your geographic location data.

The company says it uses bank account information not only to send you money, but to promote responsible financial behavior and change withdrawal limits.

For example, it scans your bank transactions to identify recurring expenses, such as utility bills. If a bill is due before your next payday, the app will limit your withdrawals to ensure that you have enough money to pay.

Activehours can’t track nonrecurring expenses, though, so you’ll have to budget for costs such as doctor’s office copays with a reduced paycheck.

The company says it stores information in an encrypted form and won’t debit your account for more than you authorize. But you should still think twice before providing sensitive information to a relatively unknown startup.

Extra features

The app has an optional overdraft avoidance feature called Balance Shield. If you opt in, Activehours will send an amount up to $100 to your bank account every time your balance drops below $100. This will count toward your daily and pay period limits.

The feature provides a financial cushion if your account is in danger of being overdrawn and it’s cheaper than paying an overdraft fee. But unlike the rest of the app, it’s not free. You can use it once at no charge, but recurring use requires a tip of at least $1.50.

A quarter of all users have enabled the Balance Shield feature, the company says.

Amrita Jayakumar is a staff writer at NerdWallet, a personal finance website. Email: ajayakumar@nerdwallet.com. Twitter: @ajbombay.