The bottom line: A paycheck advance app for on-demand or hourly workers that’s best used for emergencies.
Min. Credit Score
$100 - $500
Pros & Cons
Requires access to your bank account.
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."
Company spokesman RJ Bardsley says the app has over 10 million downloads.
Is the Earnin app right for me?
When used occasionally, Earnin can be useful if you:
Have a small emergency expense.
Can use your next paycheck to cover the money owed to the app on top of other monthly expenses you’ll have.
Are an hourly or salaried employee who uses an electronic time sheet 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:
Regularly spend more than you earn.
Work from home independently or have multiple employers.
Are paid by reloadable debit card.
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 building an emergency fund, which can cover common financial shocks and help you avoid turning to apps like Earnin or payday loans. A good first goal for an emergency fund is to build up to $500, which is the maximum amount users can get from Earnin in a pay period.
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.
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What you should know about Earnin
Fees and rates
Earnin doesn’t charge interest or fees.
Users can donate an optional “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. The company caps tips at $14.
If you use it sparingly, Earnin can be cheaper than overdrawing your account or taking out a payday loan.
Location and bank account access
To know that you went to work, the company requires an electronic time sheet or an uploaded photo of one. If you don't have a time sheet, the company asks for your geographic location data.
Earnin also says it requires your checking 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 send push notifications when your balance falls below a specific amount.
The app also offers assistance negotiating medical bills and finding payment plans through its product Health Aid. As with its payroll advance feature, the company says consumers can decide how much to pay for the service.
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.
An Earnin spokesman says the company is cooperating with the DFS investigation.
How the Earnin app works, in 6 steps
1. Create a profile on the app and give it access to your checking account. Anyone can download Earnin, but to use it, you must receive your paycheck via direct deposit.
2. Earnin tracks the hours you work. It does this differently depending on your job.
Salaried workers: The app uses location tracking on your phone to verify that you went to work.
Hourly workers: Upload photos of your daily time sheet, connect the app with your company’s online time sheet system or use location tracking.
On-demand workers: Upload photos of your task receipts, such as a Postmates delivery confirmation or a Grubhub order. Earnin automatically uploads Uber ride receipts.
3. You can access money only once you've earned it.
4. When you request money, Earnin verifies your hours worked. The company says this takes about 10 minutes if you submit through the app.
5. 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.
6. You can pay a tip, usually between $0 and $14, which Earnin deducts from your paycheck on payday along with the money you had withdrawn.
Earnin has two withdrawal limits. The daily limit is $100 for all users. The pay period limit, or the total amount you can withdraw during your pay period, depends on how much you’re paid, 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 pay is high enough and your financial behavior meets Earnin’s guidelines, your limit can increase to $500.
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