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

As Americans continue to face persistent affordability concerns, they’re turning to loan tools that are actually leaving them even more strapped for cash.

Those tools include apps that allow individuals to receive cash in between paychecks and are costing them hundreds of dollars each year in fees, according to a recent report .

An analysis by the Center for Responsible Lending’s Julian Bond Institute of bank transactions from 10,000 consumers, found 96% of direct-to-consumer versions of payday loans included fees or “tips,” which amounted to nearly $208 per year on average, or about $17 per month.

As of 2024, more than 10 million Americans used some form of “earned wage access” or “on-demand pay” tools, which give workers access to a portion of their earnings prior to their payday, allowing them to bridge gaps between paychecks.

These tools are primarily used by those who make less than $50,000 according to a 2022 Government Accountability Office report , with food and rent being the key reasons people use the service, one case study of food and restaurant workers found.

While these apps are free to use and don’t require credit checks or charge interest, they can charge fees for money to be transferred quickly, membership fees, and have a “tip” option, driving up costs to an Annual Percentage Rate (APR) of 232% for an average loan—nearly the equivalent loan rate as what traditional payday lenders offer, according to the Julian Bond report.

A 2024 Consumer Financial Protection Bureau (CFPB) report found a 90% increase in transaction volume for earned wage access from 2021 to 2022, and Tom Feltner, associate director of consumer policy at Americans for Financial Reform Education Fund, told Fortune the use of payday loan apps has “certainly increased” amid Americans’ ongoing affordability concerns.

The rise of loans at Americans’ fingertips Short-term financing has skyrocketed in popularity since the pandemic, when the emergence of these on-demand pay tools, as well as buy-now, pay-later apps aligned with increases in inflation.

Between 2018 and 2020, transaction volume for on-demand pay apps tripled from $3.2 billion to $9.5 billion , according to Datos Insights.

LendingTree found that nearly one-third of Americans have used buy-now, pay-later to finance necessities like groceries, double the 14% who used the service two years ago.

“There is a certain fear” among economists about the rise of financing apps, Panos Kouvelis, a professor of supply chain, operations, and technology at the Olin Business School at Washington University in St.

Louis, told Fortune last month.