There are several new smartphone apps that are marketed as helping you avoid overdraft fees by your financial institution. They will even give you short term loans of a small amount to help you avoid your account balance turning negative.
These apps have become popular for people as overdraft penalties can quickly add up at the worst time. Many individuals have no idea how to balance a checkbook and often are surprised when their balance dips below zero.
Some of these apps charge a nominal fee, while others require a certain sized direct deposit and a few debit charges each month. Some of them suggest tips for fronting the money for a short period which is more than the fees charged by check-cashing stores. The apps convince users to pay these exorbitant tips through subtle graphical hints where the cartoonish characters get happier when you provide a bigger tip.
Even though some of these tips pass usury amounts for the lending of the money, this is not where these companies really expect to make their money. The companies behind these apps have access to your spending history. Your data is most likely to be their most valuable asset. Knowing everything that you spend money on is a marketer’s dream. In addition to that, they will know how much money you have at any given time, so they don’t waste time marketing to you when you cannot afford what they are selling.
These apps can provide a valuable service for people struggling to get by, helping them to avoid overdraft fees. However, these apps are after valuable information as to what you have been purchasing and you need to carefully check who that information can be shared with. The app profits off their user’s information and offers little in return.