Earnin App 2021 Review: Paycheck Advance Loans

Earnin's paycheck advance is a cheaper alternative to payday loans, but it shouldn't be used regularly or to replace an emergency fund.

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Our Take

The bottom line: Earnin is a paycheck advance app for on-demand or hourly workers that’s best used for infrequent emergencies.

Earnin

Earnin

Min. Credit Score

None

Loan Amount

$100 - $500

Pros & Cons

Pros

  • No mandatory fees.

  • No interest.

  • Fast funding.

Cons

  • Requires access to your bank account.

  • May lead to poor financial habits.

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Full Review

Earnin is an app that lets you draw small amounts of your earned wages before payday. It's part of a wave of paycheck advance companies that say they provide alternatives to expensive payday loans or racking up high overdraft fees. Instead of charging interest, Earnin asks users to provide an optional tip for the service. Companies such as Dave and Brigit offer similar products.

The company says the app has over 10 million downloads and 2 million active users.

For some consumers, Earnin’s Cash Out paycheck advance is an option in an emergency, but it shouldn’t be used regularly. When you add the tip, you’re essentially paying someone else to access your earnings.

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.

  • Are an hourly or salaried employee who uses an electronic timesheet at work.

  • Have a checking account and are paid by direct deposit.

  • Don’t want to overdraw your bank account and pay an overdraft fee, typically $35.

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

  • Regularly spend more than you earn.

  • Work 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’s paycheck advance feature shouldn’t be used in place of building an emergency fund, which can cover common financial shocks.

A good first goal for an emergency fund is to build up $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 opt to 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. The company caps tips at $14.

Earnin disputes using APR to measure the cost of its tips; however, APR is the best apples-to-apples comparison across all credit products and can help you decide if one option is priced fairly compared to others.

If you use it sparingly, Earnin can be cheaper than overdrawing your account or taking out a payday loan.

The company says all users get the same quality of service, regardless of whether they tip.

Location and bank account access

To know that you went to work, the company requires an electronic timesheet or an uploaded photo of one. If you don't have a timesheet, 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.

Extra features

The app has an overdraft notification feature called Balance Shield Alert that tells you when your account balance falls below a specific amount.

If you opt in to the Balance Shield Cash Out feature, Earnin will also 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 borrowing limits.

Balance Shield Cash Out is free for one-time use. 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 Cash Out requires a fee of at least $1.50, but the alerts are free.

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.

Consumers can use Earnin’s savings account feature, called WeWin, to build savings or an emergency fund.

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 10 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.

How the Earnin app works in 6 steps

1. You 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. Users who work from home can track the hours they work as long as they submit a work email address to verify employment.

Salaried workers: The app uses location tracking on your phone to verify that you went to work. Hourly workers: Upload photos of your daily timesheet, connect the app with your company’s online timesheet 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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