What Is Earnin?
Earnin is a paycheck advance app that sends you money via a screenshot of your timesheet or through reports generated by timesheet software.
The company was formerly known as ActiveHours and was founded in 2012 by Ram Palaniappan, according to Earnin’s Crunchbase page. Palaniappan held executive and management positions at a payment processing firm and a software company previous to launching this app.
What’s unique about Earnin is that it departs from the typical payday lender in that the site doesn’t charge you fees and interest rates for your advances.
Rather, you pay what you want for each advance. Feel like being generous? Go ahead and tip 20%. In a jam and can’t afford to give them anything for your advance? No problem.
Is Earnin too good to be true? That’s what we were thinking when we did our initial research on the app. The results of our investigation are what you’ll read here.
By the end of this review, you’ll know how Earnin works, what its limitations are, how much payday lenders tend to cost, what actual users are saying and what the app’s general pros and cons are.
We’ll end the review with two or three sentences talking about who we think this app is good for.
How Earnin Works
To get a sense of how well Earnin works, we downloaded the app and used it to familiarize ourselves with the various features and options.
Once Earnin is up and running, there three main features you need to know about: Automagic Earnings, timesheets and Lightning Speed.
This feature reminds us of the mileage tracking apps we’ve reviewed. Basically, you tell Earnin your work address. Whenever you drive to work, park your car and go inside, Earnin knows you’re at work and will start their own timesheet.
If you don’t use Earnin’s Automagic option, Earnin’s paycheck advance system is dependent on your timesheet. If they don’t have a record of hours, they won’t have any proof that you worked the hours you said you did.
The app does automatic uploads of timesheets from the following jobs/time-tracking sites:
- Uber drivers
- Nimble Schedule
- When I Work
If you keep track of your hours via a Word or Excel doc, you won’t be eligible to get advances. Also, Earnin doesn’t accept printed out timesheets or work schedules.
This feature puts money in your bank account instantly once Earnin confirms your timesheet. Their website says that the feature works with most banks, although some process the deposits faster than others.
Two notable exceptions to Lightning Speed are Woodforest Bank (found at Walmart stores) and Fidelity Investments.
If you don’t have Lightning Speed, it will take one business day for your money to process.
What’s the Maximum Amount of Money You Can Deposit?
Now, as revolutionary as Earnin sounds, it has one major limitation. You start out with a maximum advance of $100.
So, if you have a timesheet that represents $2,000 worth of pay, you’re only going to get $100 of that when you first use the app.
The company’s website says that you can increase that maximum advance amount through a variety of ways that you can and can’t control.
For example, their FAQ section says that your max is based on, “your use of the app, your spending, your bank, and whether or not your employer works with us directly.”
They elaborate on the “your spending” by saying that they watch your account to see that your bank account balance is positive and that you spend less money than you make.
Earnin also points out you can increase your chances of getting a max increase by using their Balance Shield feature, which deposits $100 to your linked account when the account’s balance falls under $100.
Remember, though, you have to pay them back for the $100 Balance Shield sends to your account.
Earnin’s Fees and How They Compare to Other Payday Lenders
As we mentioned earlier, Earnin doesn’t charge you any fees or interest rates for the advances you get. Instead, they ask for tips. You can leave them as much or as little as you want.
However, Earnin is still a payday advance company. Instead of going to a seedy shop somewhere, you can do it all through the company’s app.
Here are some of the similarities between Earnin and your typical payday advance office:
- Loan amounts are $500 or less
- The money is due when your next paycheck arrives
- You give the lender access to your checking account
In our guide to payday lenders, we point out that these businesses rely on something called “churn.” It’s what happens when you can’t pay the loan so it rolls over into another repayment period and the fees/interest grow.
This is where Earnin departs from traditional lenders; your loan balance doesn’t roll over. Earnin uses in-house metrics to determine how likely you are to pay back your loan and they take that into consideration when giving you money. They fully expect you to pay them back based on their analysis of your financial situation.
If they think your income and spending are too wild, then there’s a good chance you’ll only be able to get $50 per pay period, which is below the typical beginning amount of $100.
That being said, we need to talk about how your tips translate to APR.
For example, a traditional payday lender may charge you $20 to get a $100 advance. You get the money a week later and pay the fee and the $100 you borrowed. As a fee, that doesn’t seem like much even though it’s 20% of what you borrowed.
But, because APR is calculated over the course of 52 weeks, a $20 charge equates to an interest rate of more than 700%. Even if you drop that number down to a $5 tip for $100 borrowed, the APR is still above 200%.
So, while Earnin seems like they’re doing you a favor by allowing a pay-what-you-want scenario, even a $1 tip results in an APR of more than 50% on $100 borrowed.
For comparison’s sake, credit card APR’s range from 13% to 25%.
User Reviews of Earnin
The app gets a 4.3-star rating from more than 16,000 reviews in the Google Play store. At the time of publishing, more than 12,800 of those reviews were five stars, while 1,858 were one star.
In the iTunes store, more than 7,400 iOS users gave the app an average rating of 4.7 stars.
Our Final Thoughts About Earnin: Pros, Cons and Who It’s Good For
Based on our research, we think that Earnin is a fascinating app. The advantages are pretty clear. You don’t have to go to a payday lender; all you have to do is open the app on your phone.
You aren’t forced to pay APR’s and fees; you voluntarily leave a tip and, really, you don’t have to leave a tip at all.
Also, their Balance Shield tool is a great way to protect you from overdrawing your account.
The downside is that, while the app doesn’t charge fees, even the smallest tip – $1, for example – is, in terms of APR, still pretty high for borrowing $100 for a week.
Another downside is that you typically start out with a max advance of $100. You can make the argument that $100 is good because it teaches you not to overdraw. However, if you’re in a jam and need more than $100, you’ll have to look elsewhere.
In our opinion, the app is a great fit for someone who is willing to use Earnin on a regular basis so they can increase their max amount. We also think it’s great for people who usually go to payday lenders and would rather borrow money from their phone in the comfort of their own home.
Keep in mind, though, that Earnin is a temporary solution. The issue is that consumers who go to payday lenders are having cash-flow problems. Some of it has to do with how much they’re earning and some of it has to do with how much they spend.
If you find yourself living paycheck to paycheck and need some solid, simple advice, take a minute to read our guide to making a budget.
Through our research and personal experience, we’ve found that budgets are essential to keeping your spending under control and building a healthy financial life.