The Bottom Line: A paycheck advance app for on-demand or hourly workers that's best used only occasionally.
Pros & Cons
No fees or interest.
No credit check required.
Requires sensitive financial information.
May lead to poor financial habits.
Earnin, formerly called Activehours, is an app that lets you draw small amounts of your earned wages before payday. It's 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 and TrueConnect offer similar products, but only through your employer.
A two-week pay cycle is hard on people who have to budget every penny, says Ram Palaniappan, CEO of California-based Earnin. "If they worked today, they should have access to their money today."
Earnin says Starbucks, Instacart and Apple store employees are among the app's users.
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Is the Earnin app right for me?
When used occasionally, Earnin is a useful app if you:
Are an on-demand worker whose paycheck varies.
Are an hourly or salaried employee who uses an electronic timesheet at work, or you work from a fixed location.
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.
Earnin 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.
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.
Earnin shouldn’t be used in place of an emergency fund, which can cover common financial shocks and help you avoid turning to apps like Earnin or payday loans. Saving $500 is a good start.
Maintaining a budget that includes money for everyday expenses, savings and something fun can also help you avoid living paycheck to paycheck. NerdWallet recommends using the 50/30/20 budget, which divides your money into needs, wants and savings.
What you should know about Earnin
How much Earnin costs
The app doesn’t charge fees and, if you use it sparingly, can be cheaper than overdrawing your account or taking out a payday loan.
Users can donate a “tip” of any amount, but regular tips add up. A $2 tip on a $20 withdrawal due in two weeks is an annual percentage rate of 260%, comparable to the rates that payday lenders charge.
Earnin requires your checking account information and, to know that you went to work, an electronic timesheet or your geographic location data.
The company says it uses bank account information not only to send you money but also to adjust its withdrawal limits and promote responsible financial behavior. For example, it scans your bank transactions to identify when recurring bills are due and when payday is, and may limit the amount you can withdraw if you have a bill coming due before payday.
The company says it stores information in an encrypted form and won't debit your account for more than you authorize. Earnin can't track nonrecurring expenses, though, so you'll have to budget for costs such as doctor's office copays.
The app has an optional overdraft avoidance feature called Balance Shield. If you opt in, Earnin will send an amount up to $100 to your bank account when your balance drops below $100. The amount sent will count toward your daily and pay period limits. The feature provides a cushion if your account is in danger of being overdrawn.
Balance Shield is free for one-time usage. When setting up the feature, Earnin invites you to pay a tip when it's triggered. If you don't set a tip, Balance Shield will protect you only one time. Recurring use of Balance Shield requires a fee of at least $1.50.
Alternatively, you can sign up for Balance Shield Alerts, which sends push notifications when your balance falls below a specific amount.
Payroll advance investigation
In August 2019, the New York Department of Financial Services announced an investigation into the payroll advance industry, of which Earnin is a part. Banking regulators in 11 states and Puerto Rico are looking into whether payroll advance companies are charging illegal interest rates disguised as tips or membership fees, a violation of state consumer protection laws.
on Earnin's website
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