New Payday Loan Service Charges Zero. Too Good to Be True?

Photo (cc) by HelenCobain

Here at Money Talks News, we’re not big fans of payday loans.

In fact, they suck. They may be worse than you thought. And they most definitely top our list of the dumbest ways to borrow money.

So why are we devoting a whole article to the latest payday lender? Because it works under a slightly different model, one that theoretically doesn’t suck. That’s because it doesn’t require you to pay anything in exchange for receiving an advance on your paycheck.

Money Talks News finance expert Stacy Johnson talked to Ram Palaniappan, CEO for Activehours, to find out more. Watch the clip to see what Stacy thought about the service and then keep reading to decide whether the website will work for you.

Activehours: We’re not a payday loan service

While what Activehours does is lend money against a future payday, they don’t consider themselves to be payday lenders. Instead, they say the service they offer simply allows for better cash flow management.

Here’s part of a statement from an Activehours spokesperson:

The Activehours service allows users to access their pay on demand. We let workers control their own pay day so that they aren’t forced to manage their budget around the pay cycle that their employer decides.

With the app, users can access the pay that they’ve already earned. Activehours simply allows them to access it faster than they can through their employer, who is usually bogged down by outdated accounting and payroll tools. By giving workers more flexibility around when they are paid out for their work, we believe we help people manage their cash flow to better live within their means. If a bill is due and payday is 5 days away, an Activehours user can get access to the money that their employer owes them, and use it to avoid paying a bill late or incurring an overdraft fee which would then eat into their budget.

However you describe it; payday loan or cash flow management app, the service allows you to access cash you’ve earned, but not yet been paid.

The basics of Activehours

At its core, Activehours works on the same principle as a payday lender. Cash-strapped individuals can get a short-term loan to tide them over until their next paycheck arrives.

However, the details are a little different from what you might see from a traditional payday lender. Here’s a rundown:

  • Activehours is available only to hourly workers who have direct deposit and online or computerized time sheets. Uber and Lyft drivers are also eligible.
  • The service verifies time sheets, calculates a “take home” hourly rate and makes advances available based upon hours that have not yet been paid out.
  • Individuals can cash out their available hours as needed. Not all hours will be available initially, and workers may be able to request larger advances once they become established users of Activehours.
  • Money is direct deposited into a bank account. Repayments are automatically withdrawn from the same account.
  • Activehours does not charge any interest or fees. Instead, it asks users to provide a tip, in the amount of their choosing, for the service.Tipping could get costly

That last point is what really sets Activehours apart from the competition. And the ability to choose if and how much to pay for the service could make it seem as though this payday loan is a bargain.

However, that may not always be the case. As Stacy points out in the video, a $10 tip for a $100 loan over a two-week period could end up being the equivalent of paying 260 percent interest. Still, it beats paying a $35 overdraft fee.

If you think you’re going to need to dip into a source of emergency cash on a regular basis, you may be better off finding a low-interest credit card or one with low cash-advance fees (assuming you pay it off as soon as you’re paid). But even that isn’t ideal. And that brings us to our final point.

Time to stop living beyond your means

The real problem with Activehours isn’t that you might give too big of a tip and end up paying what could translate into an outrageous interest rate.

No, the real problem with Activehours is that it serves as a crutch to let you live beyond your means. And that’s not something unique to Activehours. You could say the same about other payday lenders, as well as any credit card upon which you regularly carry a balance.

They all give you a bandage to place over the symptom of a much larger problem. That problem is usually that you either earn too little or spend too much.

In a perfect world, you’d have money in the bank to cover life’s little emergencies, and you wouldn’t have to scramble to find someone to give you cash today. However, when you spend too much or earn too little, it may feel impossible to ever get money to stay in the bank. You need to do some serious soul-searching to decide how best to tackle the problem.

We have plenty of advice for you here at Money Talks News. If you want to save money, start by reading these articles:

On the other hand, if you want to make more money, try these articles:

As for Activehours, if you need a payday loan, it may be your best bet right now. Just be careful about the amount you tip. To learn more about using Activehours or other personal loan services, visit this page of our Solutions Center.

However, we hope you’ll take stock of your financial situation, create a budget that works and walk away from payday loans forever.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
9 Affordable Ways to Make Your Home Look Expensive
9 Affordable Ways to Make Your Home Look Expensive

These products from Amazon add elegance to your home without the expense.

The 9 Best Home Insurers for Customer Satisfaction
The 9 Best Home Insurers for Customer Satisfaction

These are the only homeowners insurance companies to earn above-average scores for customer satisfaction.

5 Ways Anyone Can Save on Out-of-Pocket Health Care Costs
5 Ways Anyone Can Save on Out-of-Pocket Health Care Costs

Here’s how to lower your health care costs without skimping on care.

Retiree Households Lose $111,000 to This Social Security Misstep
Retiree Households Lose $111,000 to This Social Security Misstep

A study finds 96% of retirees make this mistake when claiming Social Security benefits.

8 Reasons Your Parents Had an Easier Retirement Than You Will
8 Reasons Your Parents Had an Easier Retirement Than You Will

Here’s why the last decades of life are harder now than they used to be.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

11 Senior Discounts for Anyone Age 55 or Older
11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

9 Deep Discounts Available on Amazon This Friday
9 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

20 Things That Are Actually Worth Stockpiling
20 Things That Are Actually Worth Stockpiling

You don’t need a year’s supply of toilet paper to survive an outbreak, but consider stocking up on these items.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

Do This in the Car If You Want to Avoid COVID-19
Do This in the Car If You Want to Avoid COVID-19

It takes just seconds to take this simple preventive measure.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

15 Products You Need — Even If You Didn’t Know It
15 Products You Need — Even If You Didn’t Know It

Discover some must-have products on Amazon that you didn’t even know you were missing.

14 Things That Are ‘Free’ With Medicare
14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.