10 million Americans are using advance loan apps to get their paychecks in advance—and it’s costing them hundreds of dollars more, report finds

In the United States, a growing number of individuals are turning to apps that provide cash advances between paychecks, despite the additional costs associated with these services, according to a recent report. The cost of these advances has been calculated at an average of $208 per year, or approximately $17 per month, according to a study conducted by the Center for Responsible Lending's Julian Bond Institute.

The analysis examined transactions from 10,000 consumers and found that 96% of direct-to-consumer payday loan apps included fees or "tips". As of 2024, over 10 million Americans have used earned wage access or on-demand pay tools, which allow workers to access a portion of their earnings prior to their payday. These tools are primarily used by those who earn less than $50,000, with food and rent being the main reasons for using the service.

The rise of these apps can be attributed to the increasing affordability concerns among Americans, particularly in light of the inflation that has occurred since the pandemic. Between 2018 and 2020, the transaction volume for on-demand pay apps tripled from $3.2 billion to $9.5 billion, according to Datos Insights. However, there are concerns about the potential for "loan stacking", where consumers take out multiple small loans from different apps, leading to increased fees and risks of missed payments.

The use of these apps is relatively new and accessible, with economists expressing concern about the potential for overborrowing by individuals at the edge of financial stability.