Not Free: The Large Hidden Costs of Small-Dollar Loans Made Through Cash Advance Apps
Center for Responsible Lending
First published April 2024
Earned wage advances (EWA) and cash advance products are small, short-term loans that are typically repaid on the consumer’s next payday either directly from a bank account or as a payroll deduction.
Consumers access these products using an app on their smartphone by linking their bank accounts or by enrolling through their employer. The costs of these very short-term loans are not always transparent to consumers, who often pay fees and leave tips to access money and run the risk of unexpected overdraft fees. Workers who are already living paycheck to paycheck may frequently find themselves pulled into a cycle of reborrowing that depletes their net earnings and further erodes their financial stability. Through a mixed-methods approach, this research aims to better understand the costs and risks of using EWA and cash advances as well as their impacts on the financial lives of low- and moderate-income consumers.