Everybody deals with cash shortages from time to time. When this happens, a lot of people run to payday lenders hoping for a quick fix. Here’s the thing: payday loans are The Worst. There are so many other, better, options out there!
You could ask a friend for a small loan. You could ask your employer for an advance on your paycheck. If you don’t need that much to keep your balance positive, you could try a cash advance app, like FloatMe.
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What is FloatMe?
FloatMe was created by Christopher Brown, Joshua Sanchez and Ryan Cleary. The company was created to help people avoid the payday loan trap and build emergency funds. In an interview with CrunchBase, Co-founder Josh Sanchez said this:
“People in general are overborrowing, and when we investigated transactional patterns, we learned that they didn’t need as much as they were borrowing…Members told us they get into a bigger hole borrowing $200, so we are helping to prevent the vicious cycle by offering a cap.”
Since its launch, FloatMe has become something of a darling in the fintech world. In early 2022, FloatMe managed to secure $16.2M in Series A funding.
How does FloatMe work?
The founders are also quick to emphasize that FloatMe is not a lender or a provider of loans. They offer advances on users’ paychecks, and those advances have a cap. That cap is no joke. Instead of offering users a couple hundred bucks in one go, FloatMe caps advances at $50. It will then transfer money to your bank account. You repay it on your next payday.
FloatMe works by connecting to your bank account and analyzing your transactions. If you meet their criteria, you will be approved for a “float.” The amount of the float will be automatically deducted from your next paycheck’s deposit.
Currently, FloatMe only works with people who are employed and can verify that they are employed by W-2 employers. Unfortunately, this means that gig workers and the self-employed are unlikely to be eligible for floats.
The FloatMe experience
First, you’ll need to download the mobile app for your phone. Though FloatMe has a web presence, you will only be able to access your account via your mobile device. It is available for ios and android.
Before you can use FloatMe, you’ll need to create an account. They tell you that your “first month is free” but that, when that month is over, they’ll be charging you $1.99/month to use their service.
Creating your account means giving the company some of your basic information (legal name, address, and phone number) and connecting your bank account via the Plaid platform. You’ll also be asked to choose a minimum balance for your bank account. This is so that the app can notify you if your balance falls below, well, whatever amount you’ve specified. Once all of that is done, you’re good to go! You can request your first float!
How long does it take to get your float? That depends on how well your bank and FloatMe communicate. Some users can get their floats almost immediately. Others take a couple of days to show up. It might be worth it, when you first sign up for the app, to do a test float. That way you can see how much time it will take for future floats to arrive.
Pros and cons of using FloatMe?
Every cash advance app is a little different. For example, what works for people who love MoneyLion might not work for you. An easy way to figure out whether FloatMe is going to be your jam is to weigh some pros and cons.
FloatMe excels at what it does. The app is super easy to use. Your floats (hopefully) won’t take forever to process or be deposited.
There are no interest or late fees.
FloatMe only does one thing. You can borrow up to $50 at a time. That’s it.
The app isn’t free. After your first month, you’ll need to pay a monthly fee of $1.99 to keep your account active, whether you use the service in a given month.
FloatMe is only available for people who work for W-2 employers. If you’re a gig worker or freelancer/self-employed, you are out of luck and will need to use a different app.
What is a cash advance app?
A cash advance app is an app that gives you an advance on your next paycheck. The amount you advance is automatically deducted from your next direct deposit and sent to the app.
Here are a few of the best cash advance apps like FloatMe
FloatMe is far from being the only option out there. Here are some other trustworthy cash advance apps.
Albert lets you borrow up to $250.
No Credit Check
No Fees (unless you want to pay to get your advance faster)
Also offers banking, balance monitoring, and help with investing
Offers cool perks to Pro Plan members, like cash back and help with bill negotiations.
Pro Plan is pay what you want, anywhere from $6 to $16 per month.
Brigit offers advances up to $250.
No credit check
Offers a bunch of extra services like financial advice, help finding gig work, etc.
Pro Plan is $9.99 per month and includes identity theft protection, flexible repayment plans, and more.
No fees for Instacash unless you want “turbo” services. Then the fee is based on the amount of your advance
Also offers banking, credit building, financial planning, crypto and investing services for additional fees.
Possible’s “cash advances” are more like small-dollar installment loans for borrowers with bad credit, so they allow you to borrow more and they don’t have to be paid back in full on your next payday. However, the fees are significantly higher than the alternatives.
Possible allows loans up to $500.
Does a credit check
The fees are $10 to $25 per $100 advanced, depending on where you live.
No other plans, perks, or services
Online banking apps
Online banking apps are just as easy to use as cash advance apps. And, because so many cash advance apps offer banking services while online banks sometimes offer paycheck advances, it’s easy to get them confused. If you’re shopping around for a new bank account, here are a couple of good ones.
Chime is the current go-to when it comes to online banking. According to the marketing, Chime is the easiest and most convenient option out there for online banking. Whether that’s true or not? That’s going to depend on what you want from your bank and its app.
Chime is similar to a traditional bank or credit union, but without the brick and mortar storefronts.
Chime offers checking accounts (which it calls “spending” accounts) and savings accounts. The spending account comes with a Visa debit card that is linked to the ATMs you’ll find in stores, like Walgreens, CVS, etc. The company also offers personal loans, credit-builder products and early access to your paycheck’s direct deposit.
Instead of a cash advance or paycheck advance, Chime has a program called “SpotMe.” SpotMe helps you avoid overdraft fees and having purchases declined if your bank account balance is too low to cover your spending.
SpotMe is only available to some of Chime’s customers. This is because the program only accepts certain types of direct deposits in its enrollment criteria. Usually, the direct deposit must be from an employer. Right now, self-employed people can’t take advantage of the program.
When you first enroll in SpotMe, you’ll only qualify for around $40 in spending coverage, before the usual fees are applied. Over time, if you pay back what SpotMe has “loaned” you on time, your spot limit will increase. Currently, the largest amount users qualify for is $200.
Varo is “younger” than Chime but is already it’s primary competition. Varo markets itself as “a bank for all of us,” because “money shouldn’t just work for some of us.”
Varo offers checking and savings accounts. The accounts are 100% free. They don’t charge any setup fees or require any minimum deposits. They also don’t charge overdraft or returned service fees. Users have access to mobile bank deposits for checks and partners with Green Dot service for cash deposits. Account holders can also sign up for “Varo Believe”, the bank’s credit building program.
Varo also bridges the gap between online banking and online cash advances with its Varo Advance program. The program is a little like Chime’s SpotMe, or your bank’s paycheck advance program. Basically, you can have up to $100 of your next direct deposit “advanced” to you when you need it. The catch is that, if you advance more than $50, you’ll have to pay a small fee. Unlike most cash advance programs, however, Varo Advance allows borrowers to repay their advances however they want, so long as the balance is taken care of within 30 days.
Best apps that require your employer to sign up
Personal paycheck and cash advance apps are not your only option if you need money quickly. It is possible that your employer has partnered with a cash advance app, too!
Employer-sponsored cash advance apps are apps that link to your timeclock or salary information. They allow you to receive the money you’ve earned as you earn it, instead of waiting for one lump sum. The apps use your employment information as verification of your earnings instead of your personal bank account.
If you are a gig worker, don’t worry! A few of these apps also pair with gig providers like Uber, DoorDash, Instacart, etc.
If you’re not sure if your employer has partnered with a cash advance app, ask them. If they haven’t, maybe they’ll start a partnership.
Here are the most reliable and popular employer and gig provider-sponsored cash advance apps:
Amazon Anytime Pay
Axos Bank Direct Deposit Express
Peer-to-peer loan apps
Finally, if you aren’t sure about cash advance apps and your employer doesn’t sponsor this service, try a peer-to-peer loan. You’ve probably seen a few P2P lenders advertised here and there. Kiva, for instance, allows users to offer microloans to people (usually in third-world countries) who need help building businesses. Here are some of the P2P lending platforms that we like best:
SoLo Funds combines lending and social media in a way that is very intriguing. Here’s how the platform works: Hopeful borrowers create listings that ask for money. Lenders then browse the listings and send money to the people whose listings they like best.
LenMe is the inverse of Solo Funds. With LenMe, hopeful borrowers post their requests and then the lenders compete to offer those borrowers the best deals. The borrowers decide which loan to take.
Zirtue is more of a facilitator/middle-person platform. You request a loan from someone you already know. They agree to lend you the money. Zirtue acts as the go-between to ensure that rates are fair, payments are made on time, etc.
How do payday cash advances work?
Cash advance apps are similar to payday loans. They’re short-term loans for small dollar amounts repaid from your next paycheck. But the app companies aren’t technically lenders. They’re just fronting you interest-free money—money that they recoup automatically on the due date, from your next direct deposit.
You request an advance. If approved, the app transfers money into your bank account. Then, when your next direct deposit arrives, the amount of the advance is automatically sent back to the app.
Tips are OPTIONAL
A lot of cash advance apps encourage users to “tip” their lenders or the companies behind the app platform. They use these tips to offset their operating costs. Some apps will try to sweeten the tip request by promising to send a percentage of your tip to a charity or non-profit.
It’s easy to get caught up in this and feel like you have to tip. Here’s the thing: YOU DON’T.
The apps cannot require you to tip them. If you want to send a tip, go for it! Just keep it to a reasonable amount. An app might “suggest” a tip amount. Pay careful attention to that amount. It may look reasonable but could end up being the equivalent of a 300% APR.
You don’t want to accidentally tip so much that you spend more than you would have if you had taken out a payday loan. It seems ridiculous, but it happens! If you aren’t sure how much to tip, use an APR calculator to determine a fair amount. For example, credit card companies charge a 36% APR. On a loan of $100 for two weeks, a 36% APR would be just under $1.50.
Why are loan apps like FloatMe better than payday loans?
There are no hidden fees or astronomical interest rates (though you may have to pay a small subscription fee)
The companies behind the apps want you to improve your finances, not get stuck in a debt trap.
The repayment terms are better.
You are unlikely to ever get sent to collections if you can’t make your payments on time. Most apps have extension requests built into them just for this reason.
How quickly can I get my cash advance?
This will depend upon the app. Most of the time deposits take a couple of business days to arrive. A lot of apps, however, will agree to send the money faster if you agree to pay a small fee.
It also depends on your bank. Some banks—like the online banks mentioned above—work better with cash advance apps than traditional banks do. They often process these transfers in a fraction of the time other banks do.
Want to learn more about why payday loans are never a good idea? Check out this video:
What to look for in a cash advance app like FloatMe
Here are some of the criteria you should consider when you’re shopping around for a cash advance app.
Find out how much you can borrow at once. The biggest drawback with FloatMe is that you can’t borrow more than $50.
How quickly will you get your money? With some apps, funds are available almost instantly, but it can sometimes take a couple of business days. With FloatMe, it varies. If you choose to subscribe, it’s probably best to test it out before you run into a situation where you truly need the advance.
FloatMe does have a small monthly membership fee. Other apps, though, don’t! And very few of them charge interest or late fees … unless you want your advance expedited. Then you can expect to pay a few bucks extra.
Are you at least 18? Are you a legal citizen of the United States? Do you have a bank account that’s more than a few months old? Can you prove these things? Then you’ll probably qualify for a cash advance app. The requirements for these apps are very low.
FloatMe just gives you an advance on your next paycheck. That’s it. Other apps, though, offer banking services, financial monitoring, budgeting tools, etc. If you want an all-in-one app, those do exist!
What are people saying about the cash app? FloatMe, for example, has nearly five-star ratings in both the Google Play and the Apple app stores.
Will the app help me build credit?
FloatMe will not help your credit score. Other apps offer this service, though!
The bottom line
One of the reasons so many people end up in payday loan traps is that they borrow more than they actually need. FloatMe wants to remove this temptation. That’s why users can only float up to $50 at a time. Other apps have similar borrowing limits — especially for first-time applicants. FloatMe’s goal (and other cash advance apps share it) is to help you improve your finances for the long term so that you don’t need them anymore.
How can I fix my spending habits?
Start by tracking every single penny you spend over the course of a month. This will help you figure out where your money is currently going. Then you can figure out where cuts can be made. It’s also worth figuring out why you spend money. For example, do you buy yourself a little treat after a hard day at work? It’s a perfectly reasonable thing to do, and a perfect pick-me-up…if it only happens occasionally. If every day at work is hard, you might find yourself spending less if you found a different job or moved to a different department.
What does FDIC mean?
Federal Deposit Insurance Corporation. They’re the agency that protects people’s money, should something happen to the bank that holds it.
Do cash advance apps offer prepaid cards?
Some of the employer-sponsored advance apps do offer refillable prepaid cards. Most of the personal cash advance apps, however, don’t. They can’t, because their systems depend on communication between their platforms and your bank or credit union in order to process transactions.