Can Borrowing from a Cartoon Bear Keep You Out of Debt?
The above is, well, amusing.
It’s from the Dave App suggesting that a short-term loan from the Dave App will keep you out of debt.
But, of course, a loan from the Dave App becomes a debt.
A debt that must be repaid.
Can you stay out of debt by acquiring new debt?
I mean, if you borrow cartoon money, sure.
But, if you are using the cartoon bear to borrow real cash, you have to pay that loan back with real cash.
A story from the L.A. Times digs deeper, explaining just how bad the fees associated with friendly, cartoon bear apps can be.
Here’s how the Times broke down the fees associated with a loan from Dave:
Given that the money had to be repaid in 12 days, the $5.99 fee and $2 tip, if considered as interest, cost Goad 122% on an annual percentage rate basis — a metric that helps compare the relative cost of loans. If he tipped $6.93, the company’s average in the first quarter, it would amount to an APR of nearly 200%. If he chose a 15% tip, the total cost would rise to $35.99 with an APR of 547% — corner payday loan territory.
That’s a pretty scary scenario.
Also, a triple-digit interest rate actually means a lot of debt!
Oh, and this note from the Extra Cash account agreement is also problematic:
IMPORTANT NOTE: THIS AGREEMENT IS SUBJECT TO BINDING ARBITRATION AND A WAIVER OF CLASS ACTION AND YOUR RIGHT TO A JURY. THE TERMS OF ARBITRATION AND THE WAIVER APPEAR IN SECTION VII(K) OF THIS AGREEMENT.
It’s big. It’s bold. And it’s bad news if you have a problem with Dave.
In short, stay out of debt by NOT borrowing from a cartoon bear.
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