Cash Advance Apps Can Be a Short-Term Bridge for People Short on Money If you find yourself short on cash, these services could be a good short-term solution.

Around 78 percent of Americans found themselves living paycheck to paycheck, according to a 2017 study by Career Builder. Perhaps it's no coincidence then that cash advance apps, which give people access to their money before payday, have become a hot trend in recent years.

These apps allow users to temporarily borrow the money they need to bridge the gap until that invoice money comes in or payday hits, at a cheaper cost compared to overdraft fees and missed payment penalties from banks. In this respect, many entrepreneurs and early stage startup employees are finding these apps genuinely helpful.

For example, I recently learned of a startup team that is building a company that gets paid on the performance of their work, so their accounts payable is in the rears each month, and they depend on these apps to provide them cash until their customer invoices get reconciled. Learning about this team and how they use cash apps for creative financing gave me the inspiration to write the article and share more apps that can help more startups.

A drawback to using cash advance apps though is that they can potentially encourage bad money habits. For example, some users may rely on accessing their cash early too often and end up with very little in the bank when money comes around.

Here's a short list of a handful of apps that can be used to support your cash needs.

PockBox app

What sets PockBox apart from many others is that users can borrow up to $2,500 -- up to 10 times higher than the amount typically offered by cash advance apps. PockBox works as a connection to multiple lenders, which may lead to increased chances of getting approved. Users can apply even if they have bad credit, and if approved, they'll usually get their cash the next business day. Interest rates vary by lender.

Float app

Float is a new app that offers 24/7 bank account monitoring and will push a variety of alerts to help users keep track of their balance more easily. Float also offers a high loan amount of up to $2,000 and is connected to multiple lenders which may increase the likelihood of getting approved.

Dave app

The Dave app is the first app of its kind, created to help Americans avoid ridiculous overdraft penalties. Dave lets users borrow up to $75 at a time in return for a $1 per month subscription fee. No credit check is undertaken. There's no interest charged, but users are "gently" encouraged to leave a tip. The loan is simply repaid on payday. The Dave app has some handy features such as alerting the user when their bank balance is running low, and it also helps them plan for future expenses.

Earnin app

With Earnin, it's possible to get paid early (up to $100 per day) for hours already worked -- and it's entirely free to use. Workers are encouraged to leave a tip if they can afford to -- but this isn't compulsory. The caveat? Users must receive wages on a regular basis via direct deposit into a checking account and also have an online timekeeping system at work or a fixed work location.

MoneyLion Plus app

Users can download the MoneyLion app and sign up to the Plus service to get access to a $500 loan with a low APR of 5.99 percent whenever they need to. The Plus service costs $19.99 per month, but this fee is waived providing the user logs into the app every day.

To be eligible for MoneyLion Plus, users must verify their identity, have a consistent source of income, have a bank account that's been open for more than 45 days and they must be able to show a positive bank balance. Credit scores are considered but a good score isn't required.

Brigit app

The Brigit app costs $9.99 per month and allows users to access up to $250 instantly. Additional features include the ability to set up automated advances, free instant transfers and free extensions for those who need a little longer to pay back what they've borrowed. Brigit doesn't look at credit scores as part of their qualifying criteria, but users must have a bank account and a recurring income from a single source.

Are these early paycheck apps appropriate for more substantial borrowing?

In short, no. Low-cost personal loans are the route to explore for larger borrowing, as opposed to the short-term lending solution that cash advance apps offer. LendingClub or Prosper are examples of lenders that provide longer loan lengths and better terms for this type of borrowing -- but they're not suitable for giving access to money in a pinch.

Cash advance apps and responsible use

Early paycheck apps and apps such as Dave can be a useful temporary solution to help entrepreneurs and startup employees avoid unpaid bills, operational expenses and even dirty little overdraft fees. However, they shouldn't be relied on regularly, as transfer/subscription fees can add up over time and leave users even more out of pocket. Think of these tools as a rich uncle that can help you in a bind. You can get a loan from him once and a while, but you don't want to depend on him every month.

What's more, frequently using these services can lead to a vicious cycle of dependency, especially for those on low incomes in impoverished areas, or anyone building a startup. Entrepreneurs who often resort to constantly borrowing money will no doubt find it hard to develop good money habits, such as building up savings, because they'll be trapped into living invoice to invoice and paycheck to paycheck for the long term.

The bottom line: like all types of loan products, cash advance apps should only be considered if absolutely necessary. If you're in that pinch, I hope these tools come in handy.

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