The Dave App Promises Low-Cost Cash Advances—What's the Catch? (2023)

The Dave App Promises Low-Cost Cash Advances—What's the Catch? (1)

Francesco Carto fotographo | Getty Images

In addition to a health crisis, the COVID-19 pandemic was a time of financial hardship for many people, with 22 million Americans losing their jobs in the early months of the pandemic. Few rushed into that vacuum like Dave, an app that provides users cash advances of up to $100. For a fee of $1 a month, the app alerts users to upcoming due dates for recurring payments like rent and utilities. If they are on track to fall a little short that month, the app will allow them to take the aforementioned cash advance.

Advertisement

Dave launched in 2017, with $76 million in funding, and another $110 million in a second round. The app received fairly positive reviews from outlets including Insider, with the caveat to be mindful of its “tipping system” (more on this later) where users can give a tip to the corporation after putting in the request for an advance. According to Insider’s review, the app defaults to a 10 percent tip, which, on a $75 loan taken 13 days before payday, is equivalent to a 280.76 percent APR—comparable to the average APR for payday loans.

(Video) is the Dave App a Scam | Mark Cuban Investor

Based on Dave’s pitch and the positive press surrounding its launch,it’s hard not to get the sense that the Dave app may be too good to be true. Without all the details of how it makes money while charging such a low monthly fee, it’s reasonable to question whether Dave is merely a rebranded version of the notoriously predatory payday lenders.

Furthermore, it doesn’t take much digging to realize that Dave has some serious security issues. After a 2020 data breach affected 7.5 million Dave users, five of them filed a class action lawsuit against the app’s owners. The plaintiffs alleged that Dave waited nearly a month to alert them of the breach, and that the company provided an insufficient explanation of how it occurred. The affected customers said that Dave described the incident as a breach at an unidentified third-party vendor, and that the service had since cut ties with that vendor. The California state court lawsuit is still pending; the federal court lawsuit was dismissed by the plaintiffs.

Advertisement

To get a better sense of what Dave’s whole deal is, VICE spoke with experts who provided more insight on how exactly the app works, its pros and cons, and its potential pitfalls. Here’s what you should know about Dave.

How exactly does the Dave app make money?

It might seem impossible for any company to make a profit from only charging users a dollar per month. But Bryan Routledge, an associate professor of finance at Carnegie Mellon University's Tepper School of Business who specializes in investing and personal finance, explained that the app is essentially providing short term loans but obscuring the interest rate. “If you borrowed $100 every month, you paid 12 percent on a loan,” Routledge told VICE. “That’s not outrageous, but it’s certainly not free. If you’re loaning out $100 and earning interest of 12 percent, that’s good business. That’s all profit.”

(Video) Dave App Commercial (2022)

Much of Dave’s marketing claims involve drawing contrasts with the specter of banks: Banks make $30 billion per year from overdraft fees; banks charge “insane interest rates.” But banks have not been able to enroll customers in any overdrafting services by default for over a decade, and Dave’s effective interest rates don’t measure up all that favorably.

Ted Rossman, senior industry analyst at CreditCards.com, told VICE that after each loan, the Dave app invites users to leave a tip, which goes directly to the company.

“While it’s technically possible to leave a $0 tip, Dave makes it difficult,” said Rossman. If you opt to leave no tip, the app displays an unhappy avatar and reminds you that you’re not helping the charity organization the company works with. The default tip is 10 percent, so if you take the maximum loan of $100, you’ll be tipping $10, plus the $1 monthly fee you’re already paying.

“While $10 may not seem like a lot of money, it could add up at scale, and it can be large in percentage terms.” Rossman explained. “Tipping $10 on a $100 loan that’s due in two weeks is astronomical when represented as an annual percentage rate (261 percent).”

Although the tip is optional, the Insider reviewer noted that after setting their default tip to 0 percent, the first time they got a cash advance they noticed it had defaulted back to 10 percent. After doing some digging, they reported that the lowest default tip allowed is actually 1 percent, so if a user chooses not to tip, they must manually enter 0 percent every time they get an advance.

According to the Consumer Financial Protection Bureau, $15 per $100 is a common structure for a payday loan. “That’s 391 percent APR,” said Rossman. “I think it’s fair to say that Dave is payday loan–like.” Rossman described Dave’s model as an attempt to be a “kinder, gentler form of a payday advance” but cautioned that it’s a slippery slope. He advised that using it once in a while isn’t a problem, but that it would be an overall poor financial habit to indulge.

(Video) Market Vibez, Solana’s Mango Exploit & ZK Scaling Season | Roundup

Advertisement

Jason Wilk, CEO & co-founder of Dave, told VICE that Dave also makes money from a gig marketplace (think Uber, Lyft, and InstaCart) as well as its Dave Banking service via Visa and MasterCard debit transactions. (Not all Dave users have a debit card issued by the app; some simply link their existing checking account to the app.)

Does using the Dave app affect your credit score?

According to the Dave website, your credit score won’t be directly impacted by using the app. The company also said Dave doesn’t conduct a review of your credit history when you join, nor does it report re-payments of your short-term loans to credit bureaus. If you miss a payment or simply don’t have the funds, Dave has a system in place to arrange collecting the payment—but the late or missed payment won’t impact your credit score, the company said. (Users are unable to take a new advance until their current one is paid off, according to a customer service page, and they will continue to be charged the $1 per month service fee.)

Routledge pointed out that if Dave helps you avoid defaulting on other payments, it could help your credit score. “What hurts your credit score is if you miss your gas bill,” he said. “If Dave can help you with one of those loans, that will improve your credit score.”

(Video) Dave Ramsey Leaves The Audience SPEECHLESS | One of the Most Inspiring Speeches Ever

Is your personal data safe with the Dave app?

In order for the Dave app to serve its intended purpose, you’ll need to provide your checking account information—so one of the most important things to be aware of is whether or not your personal data is safe with Dave. As of right now, it’s not entirely clear how secure Dave really is.

In August 2020, five Dave users filed a class action lawsuit against the app’s owners due to a 2020 data breach which reportedly compromised the personal information of more than 7.5 million users. Users alleged that Dave waited nearly a month to alert them of the breach, and that the company provided an insufficient explanation of how it occurred. The affected customers said that Dave described the incident as a breach at an unidentified third-party vendor, and that the service had since cut ties with that vendor. The California state court lawsuit is still pending; the federal court lawsuit was dismissed by the plaintiffs.

Wilk claims that all customers were notified “immediately” when the breach occurred. “We put messaging in the app and on our website and sent a notice to all our customers,” he said. Wilk declined to explain why a number of Dave users claim it took a full month to be notified rather than the speedy response Dave reports.

So, should you sign up for Dave?

It's important not to think of Dave as free money, and definitely don't feel guilted by it's tipping feature. But, as Routledge said, if it means you won't miss a bill, it can be a tool in the financial toolbox.

Follow Caitlin Flynn on Twitter.

FAQs

What is the catch with the app Dave? ›

In August 2020, five Dave users filed a class action lawsuit against the app's owners due to a 2020 data breach which reportedly compromised the personal information of more than 7.5 million users.

How does Dave cash Advance Work? ›

Dave Cash Advance: You may request a cash advance of up to $250 with no interest and no credit check required. Dave will look at your bank account history to determine the amount you're eligible for. You'll likely get a higher amount on the cash advance if you receive a total deposit of $1,000 or more each month.

How much does Dave charge for an advance? ›

Dave costs $1 per month, which entitles you to up to a $75 cash advance. If you want the cash advance to be delivered within eight hours, you'll have to pay a $4.99 express fee.

Does Dave automatically take money out? ›

Dave's advances are due in one payment when you get your next paycheck. If you don't repay it on time, Dave may automatically charge your bank account — and you'll be on the hook for any overdraft fees that come from your bank if the charge puts you in the red.

How do I stop Dave app from taking money? ›

To cancel your Dave Subscription, follow these easy steps:
  1. Open the Dave app.
  2. Go to the 'Account' tab.
  3. Find your Dave Membership.
  4. Click on 'Manage membership'
  5. Select 'View membership status' at the bottom.
  6. Click on 'Manage membership'
  7. Select 'Pause membership' at the bottom of the page.
  8. Click on 'Cancel my account'

Does Dave hurt your credit? ›

Credit building: Dave has a partnership with LevelCredit that lets users who have a spending account report rent and utility payments to the major credit bureaus. If you opt in, your on-time payments could help you build credit, but missed payments can hurt your credit.

How many times can you get an advance from Dave? ›

You can use multiple cash advances in a month, but can only have one outstanding at a time. You may not be able to get a cash advance from Dave right away. To qualify for an advance, your linked bank account must be at least 60 days old, have a positive balance, and show at least two recurring deposits.

What happens if I don't pay Dave back? ›

Dave doesn't charge late fees or penalties, however it is your responsibility to settle any outstanding balances. If you're past your settlement date, please be sure to settle your balance as soon as possible. Once any outstanding balances are settled, you can check your advance eligibility. Was this article helpful?

Why is Dave INC taking money from my account? ›

Dave charges a $1 per month Membership Fee (“Membership”) to access our account monitoring and notification services, our budgeting feature, and to maintain an active connection to your external bank account through third-party services.

How do I borrow 500 from Dave app? ›

  1. Open an ExtraCash™ account. Download the Dave app, link your bank to see if you're eligible for an ExtraCash™ advance, and then open an ExtraCash™ account. ...
  2. Advance up to $500. ...
  3. Transfer it to any account. ...
  4. Confirm your settlement. ...
  5. Settle your balance. ...
  6. Get ready for more money.

How long does it take to get an advance from Dave? ›

Funds are sent express to your debit card and are ready within 1 hour. An express fee applies to external debit card transfers. Funds are sent as a bank transfer and you will receive the funds in up to 3 days. There is no fee to send the funds to your external bank account.

How long does it take for Dave to transfer money? ›

There are different options to send money from your Dave Spending account. Send your funds to your external account for free or to a debit card for a small fee. The free option can take up to 3 days to complete.

How much can you overdraft with Dave? ›

Dave ExtraCash™ aims to help everyday Americans combat inflation and higher costs of living; the new refreshed ExtraCash™ account provides overdraft advances up to $500 for members and now enables an instant spending option with the Dave debit card. LOS ANGELES, June 16, 2022 /PRNewswire/ -- Dave Inc.

Does Dave app ask for social security number? ›

Information Borrowers Need to Provide to Get Dave Loan App Loan. Here is list of the information you need to provide so as to use the loan app: Your social security number. Bank account information.

Does the Dave app work with Social Security? ›

Your Social Security Number (SSN) is a unique and secure way for us to identify you and keep your banking information safe.

What apps give you cash advance instantly? ›

Here are the top 8 apps for cash advances.
  • Dave — Best for Highest Cash Advance.
  • Empower — Best for Quick Cash Advances.
  • Earnin — Best for Earning-based Borrowing.
  • PayActiv — Best for Short-term Loans.
  • Brigit — Best for Same-day Loans.
  • MoneyLion — Best for Multiple Options.
  • Vola — Best for Same-day Cash Advances Up to $300.
28 Jun 2022

Who can take money from your bank account without permission? ›

Generally, your checking account is safe from withdrawals by your bank without your permission. However, there is one significant exception. Under certain situations the bank can withdraw money from your checking account to pay a delinquent loan with the bank. The bank can take this action without notifying you.

What apps will let me borrow money instantly? ›

If you need a quick and easy loan, then you might want to consider an app like Earnin or Dave. Both of these apps allow you to borrow money against your next paycheck, and they don't charge any interest or fees. On the other hand, if you need a larger loan, you might want to consider an app like LendingClub or Prosper.

Will Dave overdraft my bank account? ›

Dave Banking cash management account

If you opt in to Dave Banking, you get a Visa debit card and access up to 32,000 fee-free ATMs. The account has no overdraft fees and no minimum deposit requirement to open. Note that this account does not pay an APY.

Is Dave card a prepaid card? ›

The Dave Card is a debit card that allows you to access funds in your Dave Spending Account up to your Available Balance.

How do I pay back Dave? ›

You can pay us back manually by going to the "Account" tab and reviewing the "Advances" section and selecting the current advance. If you choose to do a partial payback under Pay Other Amount,the rest of your advance will be automatically pulled from your account on your original payback date.

Can you have two Dave accounts? ›

For security reasons, we only support one Dave account per member. We also don't support joint bank accounts or shared Dave accounts.

What app will lend me $20? ›

Chime comes with the SpotMe service, which allows account holders to overdraw their accounts up to $200. The limit for new users, however, is $20. Chime deducts the overdraft amount from the user's next paycheck, helping users cover expenses without having to worry about overdraft fees. Chime accounts are free to use.

What's the app that lets you borrow $75? ›

One option is Dave, which offers short-term loans of up to $75. There's no interest or fees, and you can choose to repay the loan instant on your next payday or over a longer period of time. Another option is Earnin, which gives you access to your earned wages before your employer pays them out.

Does Dave send you to collections? ›

With respect to a failure to repay an Advance, Dave warrants it will not engage in any debt collection activities, place the amount owed with or sell to a third party, or report you to a consumer reporting agency. Dave does not waive any rights regarding fraudulent activity, and Dave will pursue instances of fraud.

Why can't I borrow money from cash App? ›

Why can't I borrow money from Cash App? The factors Cash App takes into account when working out your eligibility are things like your state of residence and credit score. Don't worry, if you're not eligible, it might just be that Cash App has rolled back the Borrow feature in your state.

Is the Dave app trustworthy? ›

Is Dave legit? Dave is a legitimate option if you're interested in mobile banking. It partners with Evolve Bank & Trust, an FDIC-insured institution. For a fee of $1 per month, you have access to a spending account, a debit Mastercard, free cash advances and credit-building and budgeting tools.

Why does Dave ask for SSN? ›

Your Social Security Number (SSN) is a unique and secure way for us to identify you and keep your banking information safe. Rest assured, we take your security very seriously and use high-level security practices (like 2048-bit encryption) to keep your data secure.

Why is Dave charging me a dollar? ›

Dave has a $1 per month membership fee to access our account monitoring, notification services, budgeting and to maintain a connection to your external bank account.

How does the Dave app make money? ›

The Dave app makes money via membership fees, donations from users, interchange fees, interest earned on cash, and referral fees. Founded in 2016, Dave has grown to become one of the leading FinTech startups in North America. Its platform now counts over 8 million users.

How long does it take for Dave to transfer money? ›

You may transfer funds between your Dave Spending Account and another bank account. The linked bank account must be located in the United States. Funds transferred through your debit card will generally appear in your Dave Spending Account within one (1) hour.

How long does Dave take to deposit money? ›

Dave will deposit your cash advance into your bank account within three days. If you need the funds faster, you can use Dave's express feature, which will ensure you have your funds within 8 hours, however you'll need to pay an additional fee.

Does Dave overdraft your account? ›

Dave's digital checking account, Dave Banking, is comparable to online accounts with no overdraft fees listed on our site. With features like no overdraft fees, no minimum requirements and up to $100 in an interest-free loan, Dave Banking is a serious competitor in the checking account space.

What's the app that lets you borrow $75? ›

One option is Dave, which offers short-term loans of up to $75. There's no interest or fees, and you can choose to repay the loan instant on your next payday or over a longer period of time. Another option is Earnin, which gives you access to your earned wages before your employer pays them out.

Why can't I borrow money from cash App? ›

Why can't I borrow money from Cash App? The factors Cash App takes into account when working out your eligibility are things like your state of residence and credit score. Don't worry, if you're not eligible, it might just be that Cash App has rolled back the Borrow feature in your state.

Can you have two Dave accounts? ›

For security reasons, we only support one Dave account per member. We also don't support joint bank accounts or shared Dave accounts.

How can I get $500 from Dave? ›

  1. Open an ExtraCash™ account. Download the Dave app, link your bank to see if you're eligible for an ExtraCash™ advance, and then open an ExtraCash™ account. ...
  2. Advance up to $500. ...
  3. Transfer it to any account. ...
  4. Confirm your settlement. ...
  5. Settle your balance. ...
  6. Get ready for more money.

Can you borrow from Dave with negative balance? ›

Dave also includes a payday loan facility — so users who face the inevitability of having to dip into a negative balance can opt to borrow up to $250 ahead of their next paycheck to see them through.

What app will lend me $20? ›

Chime comes with the SpotMe service, which allows account holders to overdraw their accounts up to $200. The limit for new users, however, is $20. Chime deducts the overdraft amount from the user's next paycheck, helping users cover expenses without having to worry about overdraft fees. Chime accounts are free to use.

What apps give you cash advance instantly? ›

Here are the top 8 apps for cash advances.
  • Dave — Best for Highest Cash Advance.
  • Empower — Best for Quick Cash Advances.
  • Earnin — Best for Earning-based Borrowing.
  • PayActiv — Best for Short-term Loans.
  • Brigit — Best for Same-day Loans.
  • MoneyLion — Best for Multiple Options.
  • Vola — Best for Same-day Cash Advances Up to $300.
28 Jun 2022

What apps let you borrow money immediately? ›

Here are five apps that let you borrow against future earnings, and some less expensive options to consider.
  • Earnin: Best for low fees. ...
  • Dave: Best for small advances. ...
  • Brigit: Best for budgeting tools. ...
  • Chime: Best for overdraft protection. ...
  • MoneyLion: Best for multiple financial products.
9 May 2022

Does Dave build your credit? ›

Some more specifics include getting paid up to two days early, the opportunity to build your credit history, and get up to $100 advances without paying a fee. Don't worry about fees, either. There are no overdraft fees, no minimum balance fees, and no ATM fees from the 32,000 MoneyPass ATMs in its network.

Videos

1. Where in the World Does the Fed Go Next? Alex Gurevich Vs. Dominique | Macro Hive Webinar Debate
(Macro Hive)
2. How The Economic Machine Works by Ray Dalio
(Principles by Ray Dalio)
3. Scientists May Have Accidentally Found a Way to Treat ALL Cancers | SciShow News
(SciShow)
4. The Gig Economy Was Always A Scam
(Wisecrack)
5. Dennis Prager DESTROYS Ana Kasparian
(Actual Justice Warrior)
6. Robert Kiyosaki: HIGH CASHFLOW PASSIVE INCOME IDEAS[Generate Cash Flow]
(Motivation Management)
Top Articles
Latest Posts
Article information

Author: Nathanial Hackett

Last Updated: 01/04/2023

Views: 5856

Rating: 4.1 / 5 (52 voted)

Reviews: 83% of readers found this page helpful

Author information

Name: Nathanial Hackett

Birthday: 1997-10-09

Address: Apt. 935 264 Abshire Canyon, South Nerissachester, NM 01800

Phone: +9752624861224

Job: Forward Technology Assistant

Hobby: Listening to music, Shopping, Vacation, Baton twirling, Flower arranging, Blacksmithing, Do it yourself

Introduction: My name is Nathanial Hackett, I am a lovely, curious, smiling, lively, thoughtful, courageous, lively person who loves writing and wants to share my knowledge and understanding with you.