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According to a report from the Consumer Financial Protection Bureau, Americans paid $15 billion in overdraft fees in 2016.
The average amount consumers overdraft their accounts by is only $24 but the corresponding fee is $34, on average. Essentially what this means is that consumers are paying $34 to borrow $24 from their bank. Furthermore, most people repay their overdrafts in three days, meaning they are essentially paying a 17,000% APR.
It’s pretty staggering to see those numbers.
The Dave app was created as a way to help people avoid overdrafts and the accompanying fees. The Dave Overdraft App raised $13 million in one round of fundraising, and one of the key investors was Mark Cuban.
So what are the features of the Dave app and how does the app stack up?
How the Dave App Works
The Dave app is intended to help people avoid overdraft fees. The membership fee to use the app is $1 a month. Features of the app include the ability to plan for upcoming expenses and make sure that bills and automatic recurring charges aren’t forgotten. The app alerts users if they have an upcoming bill that could cause a low balance or a negative balance. The app also provides alerts if the user is spending too much.
Dave app users can get an advance through the app until their next payday if they do need to cover a charge. In order to use this feature, the person who downloads the app needs to have a steady paycheck that’s directly deposited into their account. The advance may be up to $75. The amount that’s advanced is then auto-debited out of the user’s next paycheck.
The Dave Overdraft App seems somewhat simple, but the features it uses are actually pretty powerful. The Dave app looks at income and spending habits and uses predictive analysis to determine how low a user’s balance could go between the current time and their next paycheck. The warnings are helpful as well, and the app calculates cash flow each month to show how many dollars came in versus going out.
The Dave app is essentially a budgeting app for someone who lives paycheck-to-paycheck. It allows people to avoid not only overdrafts but also gain more understanding and insight into their spending habits.
The paycheck advances are also a benefit for some people, because they’re like a small payday loan without the high predatory fees.
The Dave app company also has a unique feature. While the cash advances are free, if you choose, you can tip the company. Then a percentage of what you tip is donated to nonprofit causes.
There are only a few downsides to consider with the Dave app. First, it does cost $1 a month to use, and some people might prefer a free budgeting tool. However, this is substantially lower than the cost of the Brigit app.
The other possible downside comes with the payday advance element. This might encourage some users to spend money they don’t have, and then they’re going to start each paycheck out with a debt to the app if this becomes a habit.
The Dave app is an interesting tool, and it can provide significant benefits, but only for certain people. For example, if you are not living paycheck-to-paycheck, you might not find much value in this app at all. However, if you do live paycheck-to-paycheck, this app can help you save a significant amount of money, and it’s also a simple and convenient way to gain transparency into your spending habits, which can help you make better long-term financial decisions.
The app’s design and interface are simple, and it just keeps you very cognizant of what’s happening in your financial life so you can avoid overdrafts and be more empowered financially. It could be a helpful tool for someone who wants to ultimately break their cycle of paycheck-to-paycheck living.
Author: Ashley Sutphin