Apps like Dave

Paycheck advances run on two business models. Figuring out which type an app is tells you plenty about what it will charge and how it gets repaid.

• Direct-to-consumer apps. You register by yourself, and there is no link between the app and your employer. They use information such as your pay stubs or bank deposits to decide how much to advance.
• Employer-partnered providers. Your workplace enrolls with the provider and offers it as a benefit for staff.

A direct-to-consumer app is not connected to your payroll. To set your advance amount, it reviews your pay stubs or the deposits landing in your bank account.

Yes. Some providers work through employers instead of directly with you. You can only use one if your workplace offers it, so it's worth asking HR or checking your benefits.

These providers skip a credit check, and in most cases they cannot withdraw from your bank account. That matters, because when an app pulls repayment from your bank and the money isn't there, your bank can charge you overdraft or NSF fees.

People using direct-to-consumer apps often pay with subscriptions or tips. The CFPB says subscription fees are much more common here than with employer-partnered providers.

Three kinds of charges can appear:

• A monthly subscription. Check whether the subscription fee applies in months when you do not take an advance.
• An instant transfer fee. This is the price of getting your money immediately rather than waiting a few days.
• A tip. It gets framed as optional, yet it still raises the total you pay.

APR expresses the yearly cost of borrowing as a percentage, which lets you line up very different products and compare them. A fee that seems tiny can translate into a very high APR when the advance runs only a week or two. In one CFPB example, a short advance carried a rate of 580.4%.

To see how this works, picture Lee borrowing $100 and paying it back in 14 days, with a $1 monthly fee and only one advance in that month.

By leaving out the tip and using a standard transfer, Lee cuts the cost from $9.99 to $1.

How This Is Worked Out

You don't need to do the math yourself. The idea is simple: the shorter the advance, the more a flat fee counts for, so $9.99 on two weeks looks like about 260.5% a year.

Many of these apps repay themselves by taking the money from your bank account. If it isn't there, your bank may charge an overdraft fee or an NSF fee. That second charge is what your bank applies when a payment tries to go through but there isn't enough money in your account.

Certain direct-to-consumer providers say their terms let them pursue any unpaid balance when that bank pull fails. Checking an app's terms before joining shows you whether it keeps that option.