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Can you pay a loan with a credit card? Yes, paying a loan with a credit card is sometimes possible. Yet, whether or not you can do so depends on factors such as the lender’s policies or the type of loan you want to pay off.
Are you looking for a creative way to pay off your loans? If you hope to get extra travel points while reducing your monthly payments, you might wonder, “Can you pay a loan with a credit card?”
This post will delve into the types of loans you can pay off with a credit card and the pros and cons of making these payments.
In This Piece:
Can I Pay a Loan with My Credit Card?
Whether or not you can pay a loan with a credit card depends on various factors, including the lender’s policies and the type of loan you wish to pay off.
While some lenders may allow credit card payments, others may not accept them. Understanding the terms and conditions of your loan agreement before attempting to pay it off with a credit card is crucial.
Which Loans and Debts Can I Pay with a Credit Card?
You can use credit cards to pay off different loan types, providing flexibility and potential benefits. Here are some common types of loans you can typically pay with a credit card:
Personal loans: These unsecured loans can often be paid with a credit card, allowing you to consolidate debt or manage your monthly payments conveniently.
Medical Bills: Many healthcare providers accept credit card payments for medical expenses, allowing you to pay off medical bills over time.
Small Business Loans: If you have a small business loan, check with your lender to see if credit card payments are accepted. This option can offer cash flow management advantages for entrepreneurs.
Balance Transfers: While not a specific loan, balance transfers are a preferred method. They allow you to move existing credit card debt to a new card with a lower interest rate, potentially saving you money in the long run.
Pros and Cons of Paying Loans with Credit Card
Using a credit card to pay off loans has its own advantages and disadvantages. Let’s explore both sides to help you make an informed decision.
Pros
Convenience and flexibility: Paying a loan with a credit card provides convenience and flexibility, allowing you to manage your debt from a single source. It simplifies your monthly payments and can help you stay organized.
Rewards and cash back opportunities: Some credit cards offer rewards programs or incentives, allowing you to earn points or money back on your loan payments. This can be beneficial if you use your credit card responsibly and take advantage of these perks.
Potential for consolidation: If you have multiple loans or high-interest debts, paying them off with a credit card can consolidate your debt into a single monthly payment. This simplifies your financial obligations and may allow you to save on interest charges.
Cons
Higher interest rates and fees: Credit cards typically have higher interest rates than other loan types. If you cannot completely pay off the credit card balance each month, you may incur significant interest charges, which can offset any rewards or benefits.
Impact on credit score: Utilizing a large portion of your available credit can impact your credit score negatively. Additionally, applying for new credit cards to pay off loans may result in hard inquiries on your credit report, potentially lowering your score.
Limited acceptance and more restrictions: Not all lenders accept credit card payments, and some may impose restrictions or fees for using this method. It’s essential to confirm with your lender before attempting to pay off a loan with a credit card.
Then, is it a good idea to pay a loan with a credit card? It depends on your unique circumstances. It can be advantageous in certain situations, such as consolidating high-interest debts or taking advantage of rewards programs.
However, it’s crucial to consider the interest rates, fees, and potential impact on your credit score. Assessing your financial goals and consulting with an advisor can help determine if this approach aligns with your financial well-being.
How to Pay a Loan with a Credit Card
If you’ve decided to pay off a loan with a credit card, follow these steps:
Review loan terms: Confirm that your lender accepts credit card payments and inquire about any associated fees or restrictions.
Assess your credit card’s terms: Check the interest rate, credit limit, and any balance transfer options on your credit card. Ensure that the card’s terms align with your financial goals.
Calculate feasibility: Determine if paying off the loan with a credit card is financially feasible based on the interest rates, fees, and your ability to repay the credit card balance promptly.
Contact your lender: Inform your lender of your intention to pay the loan with a credit card and follow their instructions for making the payment.
Make payments promptly: Pay your credit card bill on time to avoid additional interest charges and late fees.
FAQs
Many questions come up regarding paying loans with a credit card, but there are four common questions people always seek answers for. Let us take a look.
Can You Pay a Mortgage with a Credit Card?
In most cases, paying your mortgage with a credit card is impossible. Mortgage lenders typically require payments through bank transfers, checks, or online bill payment methods. However, you may be able to indirectly use a credit card by utilizing balance transfer checks or money transfer services to pay off a mortgage. Before considering this option, assessing the fees, interest rates, and credit card terms is essential.
Can You Pay Off a Car Loan with a Credit Card?
Car loan lenders generally do not accept credit card payments directly. Like mortgage payments, you can typically make car loan payments through bank transfers or other approved payment methods. However, you may be able to use a credit card to indirectly pay off a car loan by employing balance transfer checks or money transfer services. Evaluate the feasibility and costs associated with this approach before proceeding.
Can You Pay a Student Loan with a Credit Card?
Paying student loans with a credit card is usually not possible. Most student loan servicers do not accept credit card payments because they have high transaction fees. However, you can explore alternative options such as balance transfers or personal loans to pay off student loans. It’s crucial to evaluate the interest rates, fees, and terms of these options before proceeding.
Can I Use a Credit Card to Pay Off Payday Loans?
While it’s possible to use a credit card to pay off a payday loan, it’s generally not advisable. Payday loans can come with high interest rates, and adding credit card interest can lead to significant debt.
Exploring other alternatives for paying off payday loans is recommended, such as negotiating a repayment plan with the lender or seeking assistance from credit counseling organizations.
In conclusion, paying off a loan with a credit card can be a viable option depending on your specific circumstances. It offers convenience, flexibility, and potential rewards or debt consolidation benefits. However, it’s essential to consider the higher interest rates, fees, and potential impact on your credit score.
Assess your financial situation by consulting with professionals if needed, and ensure that your credit card terms align with your goals. To find the right credit card and loans, visit our credit cards and personal loans. Empower yourself to take control of your credit and achieve your financial well-being.
There’s more to banking than low monthly fees, high yield savings, and a large ATM network. More Americans today seek banks and credit unions that align with their values when it comes to sustainability and social responsibility.
The U.S. banking system tends to disregard lower income and rural communities, with traditional banks establishing multiple branches in the country’s largest and wealthiest cities. The most socially responsible banks, on the other hand, provide online banking, low monthly fees, and no minimum deposit requirements, making them accessible to lower income individuals and families. They may also support efforts to help lower income individuals qualify for personal loans, auto loans or mortgages at fair interest rates.
But that’s not all that comes with socially responsible banking. Socially responsible banks emphasize financial literacy for those in their local community. They might also consider their organization a green bank, committed to fighting climate change and avoiding projects that support fossil fuels.
10 Best Socially Responsible Banks and Credit Unions
The best socially responsible banking institutions combine sustainability, accessibility, transparency and ethics to help make the world a better place. Yet, you won’t sacrifice top-notch personal checking and savings or even high-quality business banking when you choose one of the financial institutions on our list. You can have the best of all worlds – and do what’s best for the world – by choosing a socially responsible bank or credit union.
1. Aspiration: Best for Online and Mobile Banking Services
Aspiration is not a bank. But it’s one of the best cash management accounts offered anywhere online, with no monthly fee and a host of money management features. The Aspiration Plus Spend Save account that offers 3% interest on savings.
Aspiration is a certified B-Corp that shows its commitment to socially responsible banking with a variety of programs. Aspiration will plant a tree each time you round up a debit card purchase to deposit the difference in your Save account. It pays 3% to 5% cash back on debit card purchases with companies that are members of the Conscience Coalition, a group of small businesses devoted to social responsibility and sustainability.
Aspiration offers two accounts: One asks members to “Pay-What-Is-Fair,” which means you can use the account for free if you choose. Aspiration Plus costs $7.99 monthly or $71.88 annually (save $24 when you pay upfront.) Save accounts in the Pay What Is Fair model earn 1% APY, while Aspiration Plus savings accounts earn 3% APY.
2. Amalgamated Bank: Best for Investment Planning
Amalgamated Bank has branch locations in the nation’s largest cities: Boston, New York, San Francisco and Washington D.C. The bank offers personal checking and savings accounts with no monthly fees.
Amalgamated Bank offers four checking account tiers, including three interest bearing accounts. Two of the accounts have no minimum opening deposit. If you choose the interest earning Give-Back Checking account, you’ll earn a high APY of 0.90% – 0.95%, with an additional contribution of one-half of your interest earnings going to the charitable organization of your choice.
In addition to its choices in checking and savings accounts, Amalgamated Bank stands out when it comes to helping new retail investors choose ESG companies to invest in and plan for their future.
3. Spring Bank: Best for New Yorkers
Hailed as New York’s first B Corp bank, Spring Bank offers personal and business banking online and at branches in Harlem and the Bronx. The Green Checking account offers no monthly fee with direct deposit, paperless statements and no overdraft fees. If you need an account to write checks, you’ll want to choose the Basic Checking account.
Spring Bank deposits are insured by the Federal Deposit Insurance Corporation, up to $250,000 per depositor, per account. But the bank works with the IntraFi Network to also insure multi-million dollar deposits across multiple reputable U.S. banks.
Spring Bank offers CDs with terms from 90 days up to five years with a minimum deposit of just $250 and interest rates ranging from1.50% APY up to 3.25% APY. The bank also has a high-yield Vacation/Club savings account for short-term savings.
Spring Bank ranks in the top 5% of all 3,000 B Corps across the world and earned awards for its Governance and Customer Service in 2022. The company strives to provide affordable financial products, enabling its customers to avoid what it calls “fringe” financial products like check-cashing services and payday loans.
The bank also supports small businesses in New York and beyond with business checking accounts, money market accounts, and business loans.
4. Beneficial State Bank: Best for West Coast Residents
With seven locations across California, Oregon, and Washington, Beneficial State Bank is the B Corp bank of choice for those on the West Coast. The bank’s majority owner is Beneficial State Foundation, a nonprofit organization serving the public interest.
Beneficial State Bank offers three checking accounts, all with a $50 minimum opening balance and a low monthly service charge. eChecking waives the monthly fee if you sign up for eStatements. Checking and Interest Checking products have low monthly service charges that are easy to waive if you meet certain criteria. The bank also has savings, money market, CD, and IRA accounts to help you meet your long-term and short-term savings goals.
With an emphasis on ethical, equitable banking, Beneficial State Bank is a green bank that does not support or lend fossil fuel companies. The bank shows where every percentage of your deposit goes and says that 75% of its lending occurs within its mission categories. The other 25% supports other categories, but never to projects or organizations that cause harm to the planet or the people on it.
Some of the bank’s top lending categories for businesses and consumers include environmental sustainability, affordable housing, auto loans with fair interest rates, and health and well-being. The bank is also a preferred lender for clean vehicle programs in the state of California.
5. City First Bank, A Subsidiary of Broadway Federal Bank: Best for Commercial and Nonprofit Banking
City First Bank is part of a family of companies devoted to socially responsible lending and personal and business banking in low to moderate income communities. City First Bank, based in Washington, D.C., is a black-led, minority depository institute (MDI), as well as a B Corp and a member of Global Alliance for Banking on Values.
City First Bank offers a variety of personal and business banking products, as well as accounts for nonprofit organizations. The personal checking account has no monthly fee if you meet any of four criteria:
One monthly direct deposit
10 debit card transactions
eStatement enrollment
Minimum monthly balance of $100
The bank also offers a personal savings account, CDs, money market accounts and savings accounts for minors.
6. Sunrise Banks: Best for Mortgages
Sunrise Banks offers a full range of personal banking products, including personal checking, savings accounts, credit cards, and a pre-paid Mastercard. But it is best known for its Pathway2Home affordable mortgage product, as well as other mortgages with down payments as low as 3%. The bank also writes VA loans with no down payment required.
By supporting affordable housing and helping Minnesota residents get into homes of their own and begin building generational wealth, Sunrise Banks shows its commitment to socially responsible banking. Like many of the socially responsible banks on this list, Sunrise Banks is a member of GBAV, a Community Development Financial Institution, and a B corporation.
7. Clean Energy Credit Union: Best for Clean Energy Loans
Most of the banks on our list support efforts to reduce climate change, do not help fund or support fossil fuel companies, and run their organization sustainably. Clean Energy Credit Union works to fund renewable energy through personal loans for electric bicycles, solar electric systems, geothermal heat pump systems, and green home improvements. Clean Energy Credit Union also offers auto loans for electric vehicles.
While the credit union specializes in funding renewable energy and other loans, it also offers options for personal checking and savings accounts. Checking accounts offer dividends from .01% APY to 3.56% APY with a minimum opening balance of just $25 and no monthly fees if you meet certain requirements, including having a Clean Energy loan.
Savings accounts include a bank account with a 0.15% APY and a minimum opening deposit of $100, certificates, and a money market account with dividends ranging from 0.95% up to 1.61% APY, with a minimum deposit of $2,500.
As part of its commitment to green living, the credit union offers bio-based, compostable debit cards that are eco-friendly. It is also one of the few banks or credit unions on our list that offers a Carbon Zero Teen Account online, which shows your teen the carbon offsets their deposits can fund.
8. National Cooperative Bank
National Cooperative Bank offers high yield CDs, and money market accounts, as well as checking and savings accounts and business products. The bank offers an interest earning checking account with a 0.90% APY and no minimum opening deposit. There is a $15 monthly fee if the balance falls below $500.
The money market account has a high 2.28% APY, with a minimum balance of $5,000 to avoid the $25 monthly fee. You will need just $100 to open the account. You can earn a 4.34% APY on with a 12-month CD with a $2,500 minimum opening deposit.
While the bank is committed to helping its customers earn money through high interest rates, it is equally committed to its duties as a socially responsible bank. The bank has donated $8 billion to support underserved communities nationwide, and provided loans and investments of $475 million to low and moderate income families, including mortgage loans.
9. Clearwater Credit Union: Best for Previously Unbanked Consumers
Clearwater Credit Union is a certified Community Development Financial Institution and a member GBAV. While most credit unions are devoted to serving their local communities, Clearwater takes it a step further by donating $1.6 million to 290 non-profit organizations in 2022. Employees donated more than 1,340 volunteer hours within their local communities, and the credit union awarded $20,000 in scholarships to students in the credit union’s home state of Montana.
Clearwater CU offers multiple choices in bank accounts, including a basic checking with no monthly fee, a premium checking that pays dividends, and a SmartSpend checking account with a low, $5 monthly fee for previously unbanked consumers.
The SmartSpend account can help lower income individuals and families avoid the fees that come with check cashing services or prepaid debit cards. It also gives them the opportunity to avoid overdraft fees while gaining the convenience of a deposit account, debit card, and access to mobile banking.
10. Carver Federal Savings Bank: Best for Small Business Banking
Many of the banks on our list devote time and money to sustainability, equality, and other social causes. But they don’t necessarily offer the highest interest rates available in online banking today. Carver Federal Savings Bank, however, is a Black-operated, socially responsible bank that also delivers high-yield savings of 4.00% APY.
But there is a catch. You’ll need a $5,000 minimum opening deposit. This might make the Carver savings account inaccessible to many in underserved communities seeking personal checking and savings accounts. However, for those on firm financial footing who want to support a socially responsible bank, Carver’s high yield savings is a solid choice.
Beyond the high yield savings, Carver is known for an array of checking and savings products for small business owners, including a money market account with 2.00% APY and a business interest checking account.
Start-up businesses or those with low-to-moderate balances might prefer the Carver Community Business Free Checking with no minimum balance, no monthly fee, and 200 free transactions per month. The bank focuses on Black- and Minority-owned businesses as well as women-owned businesses across New York City.
Carver is a designated CDFI and has reinvested 80% of every dollar deposited into NYC communities. It also donated $149 million in New Market Tax credit and more than $259 million in leveraged loans across the New York metro area.
How to Choose Socially Responsible or Sustainable Banks and Credit Unions
When you’re shopping around for a socially responsible bank, first consider what aspects of ethical banking are most important to you. Are you looking for a bank committed to serving low income communities, or one that puts a focus on renewable energy? Maybe sustainability is the most significant aspect to finding a socially responsible bank that aligns with your values.
Of course, you also want to think about all the other elements that you would consider for your personal banking needs. These include low fees, online banking capabilities and an intuitive mobile app, early availability of your direct deposits, and a high yield savings account.
Our list of the best socially responsible banks takes all these factors into consideration and showcases banks that back up their values with investments – in their communities and in the environment.
Organizations That Support Sustainability and Social Responsibility
The best socially responsible banks often showcase their commitment to ethical banking through certifications or membership in organizations that support and reflect their values. If a bank is a member of the Global Alliance for Banking on Values, recognized as a community development financial institution (CDFI) or a Certified B corp, you know the bank has demonstrated its commitment to ethical banking.
Global Alliance for Banking on Values (GABV)
The Global Alliance for Banking on Values (GABV) is a worldwide network of socially responsible banks committed to ESG values. GABV banks focus on three pillars:
Finance change
Do no harm
Sustainable products and services
To join the Global Alliance for Banking on Values (GABV), banks must show their commitment to sustainability, and have a balance sheet of at least $50 million. They must be a full service bank and show financial stability and stable governance. Many of the best socially responsible banks are members of the Global Alliance for Banking on Values (GABV).
Community Development Financial Institutions (CDFIs)
A Community Development Financial Institution is a bank, cash management account, or credit union that is certified by the U.S. government. It’s a bank that has shown a commitment to providing banking services in low income communities and underserved communities across the U.S.
Unlike many other financial institutions, Community Development Financial Institutions focus on areas such as economic development, affordable housing and supporting small businesses in their local community.
Certified B Corp
A Certified B Corp is any organization or socially responsible financial institution that successfully balances purpose and profit. Organizations can apply for B Corp certification if they demonstrate transparency, social responsibility, and show high social and environmental sustainability standards. Banks and credit unions must pass rigorous certification standards to become recognized as a B Corp.
FAQs
Still have questions about the best socially responsible banks? Check out some commonly asked questions below.
Which banks are eco-friendly?
Many U.S. banks meet eco-friendly requirements in a variety of ways. Some, like Clean Energy Credit Union, refuse to support fossil fuel companies. Aspiration plants a tree whenever customers round up their debit card purchases to deposit into a savings account.
To find eco-friendly banks, you can look up their ESG (Environmental, Social & Governance) ratings on their websites, in their financial statements, or on a website like Sustainalytics.
Remember, ESG ratings are derived from many factors, including a company’s diversity & inclusion practices, sustainability, charitable donations, and more. You may have to dig deeper to see which banks employ sustainable practices to reduce their carbon footprint.
How Can You Determine Which Banks Are Committed to Ethical Banking?
A search on a company website should help you find the best socially responsible banks committed to ethical banking. Check online to see if the bank helps underserved communities or the unbanked or underbanked population. Ethical banks may be recognized as a community development financial institution.
What is responsible banking?
Responsible banking or ethical banking typically focuses on three key areas:
Banking access and community development
Environmental impact and climate change
Holistic social responsibility
What is an ESG bank?
An ESG bank focuses on environmental sustainability, social responsibility and ethical governance.
Whether you got a new job and are looking for somewhere to stash your paycheck, or are just looking for a new bank that better meets your needs, you may have spent some time considering where to open up a bank account.
While there are many private banking options to choose from, not all of them effectively meet customers’ needs. Many Americans are interested in consumer-friendly banks that are accessible and have low or no fees, while others look for banks that have local roots or more ethical behavior than bigger nationwide banks. Still, other Americans are unbanked, meaning that they don’t have access to any checking or savings accounts with a bank or credit union.
What’s Ahead:
What is public banking?
Representatives Rashida Tlaib and Alexandria Ocasio-Cortez have recently introduced legislation that could provide a promising alternative to traditional banks.
The Public Banking Act would establish a grant program that would allow for the formation of state and locally administered banks. While this act wouldn’t establish new public banks in and of itself, it would make it easier for public banks to form and to become insured by the FDIC.
These public banks would operate as nonprofits, and wouldn’t charge any monthly maintenance fees or require minimum deposits. That would make them accessible to citizens who find themselves shut out of the current banking system.
Since they wouldn’t be as focused on turning a profit as traditional banks, public banks could also provide lower interest rates for small businesses and public infrastructure projects, investing in local communities and cutting out Wall Street middlemen.
How does public banking work?
Public banking would function as a public service, like post offices or fire departments. In fact, in many countries, public banking is often directly tied to the postal system. The United States even had its own postal banking system from 1911 to 1966.
Today, there is one public bank operating in the United States, the Bank of North Dakota.
Unlike privately owned banks, public banks aren’t beholden to shareholders or required to turn a profit at the expense of ordinary consumers. Instead, these banks are able to charge lower fees and lend money at lower rates to local consumers and businesses.
Public banks can receive deposits from local and state governments in the form of tax revenue and other government income, and can also partner with existing local banks to fund a variety of projects.
How public banking could affect your finances
For many people, banking with a public bank would be pretty similar to banking with a traditional for-profit bank. Some of the potential benefits of public banking could include providing access to banking for more Americans, investing in local and community projects, and effectively delivering relief funds and government payments.
Helping unbanked and underbanked Americans
As of 2019, approximately 7.1 million American households were unbanked, meaning that no member of the household had a checking or savings account with a bank or credit union. For many Americans, high minimum deposit requirements prevent them from opening an account, while others cite excessive fees and a lack of trust in private financial institutions as reasons why they do not have a bank account. When money is tight, these Americans often rely on alternative services, like payday loans or pawn shops, with high fees and punishing interest rates.
Public banks would charge no monthly maintenance fees and have low or no minimum deposit requirements, making them accessible to many Americans who currently fall through the cracks of the private banking system. Public banking would also provide an alternative for Americans who have bank accounts but are currently dissatisfied with their bank or unable to qualify for other financial products.
Investing in local communities
Because public banks would not be compelled to pursue sky-high profits, they could offer loans at low interest rates to fund local businesses and public infrastructure. These could include projects like affordable housing and renewable energy. Some public banks, like the Bank of North Dakota, also offer low-interest loans to students and other specific groups.
Public banks would cut out the middleman and keep funds local, instead of profiting national banks, executives, and shareholders.
Effectively distribute relief funds
During the pandemic, millions of Americans were eligible for relief funds and stimulus checks to help them weather the turbulent economic times. While some Americans were able to receive funds directly to their bank account through direct deposit, others were mailed paper checks they had to cash, often accompanied by high check-cashing fees. Still, other Americans waited weeks or months for their funds to arrive, during a time when money was tight.
Public banks would be one way to easily and effectively distribute funds to Americans, without relying on private institutions. They would expand access for Americans without bank accounts and would prevent predatory services from taking a chunk out of much-needed relief funds.
Better for the environment
Another way public banks would operate differently than private banks is in their effect on the environment. The Public Banking Act would prohibit public banks from investing in fossil fuel projects, and would instead provide public banks with the capability to issue low-interest loans for environmentally-friendly projects.
This puts public banks in stark contrast to private banking behemoths, who have invested over 2.7 trillion dollars in fossil fuels since 2016, according to a report from the Rainforest Action Network.
A public alternative to big banks
Public banks wouldn’t replace big banks; instead, they’d provide an alternative for consumers dissatisfied with the status quo. This would give Americans the ability to choose between for-profit banks and local, community-driven public banks.
In some cases, public banks could even partner with existing local banks to more effectively distribute funds. Public banking wouldn’t solve all of the financial industry’s problems, but it could provide a more ethical alternative to the current options.
Drawbacks of public banking
While public banks attempt to solve many of the problems of the current banking system, they’re not entirely without flaws. Some potential drawbacks to public banks include potential lack of oversight and insufficient funds, as well as the inherent risk that all banks, public or private, face when it comes to lending money that may not be paid back.
Alternatives to public banking
For now, public banks still aren’t an option for the vast majority of Americans. However, there are some banking options that beat the competition when it comes to consumer-friendly policies, low fees, and ethical behavior.
Credit unions
Credit unions share some similarities to public banks in that they aren’t beholden to shareholders and executives, and often have local roots and programs that benefit the community. Like public banks, credit unions are not for profit, but instead of being owned and operated by local or state governments, credit unions are cooperative institutions owned by members.
Credit unions also often feature lower fees and rates than for-profit banks. Some federal credit unions even offer Payday Alternative Loans, which allow cash-strapped consumers to borrow money at lower rates than predatory payday loans.
Low-fee banks
In recent years, consumer-friendly, low-fee banks have proliferated as an alternative to big banks with exorbitant rates and fees. Many of these banks primarily operate as online banks, with simple websites and mobile apps designed to make navigating the banking process easier for consumers.
Ethical banks
Many big banks make harmful investments in areas like fossil fuels and for-profit prisons. While these investments are good for a bank’s bottom line, informed consumers may be interested in more ethical alternatives.
Companies like Aspiration, Amalgamated Bank, and Beneficial State Bank are B Corp certified, which means that they meet high standards for social and environmental performance, transparency, and accountability.
Some banks, like Sunrise Banks and First Green Bank, are members of the Global Alliance for Banking Values, which is a network of banks around the world that are committed to community investments and driving positive change.
Still, other banks are designated as Community Development Financial Institutions, or CDFI. These banks are dedicated to providing banking access for low-income and marginalized individuals and communities. Banks like City First Bank of DC, Southern Bancorp, and VCC Bank are all CDFIs.
Summary
While the Public Banking Act is still only a bill, it represents a promising alternative to traditional banking for millions of Americans. This piece of legislation would also complement other related policy proposals, such as postal banking and the Green New Deal. In the meantime, there are still a variety of banking options with low fees and ethical investment practices for consumers who qualify.
Whether you’ve been a single mom since day one or are in the process of becoming a solo parent, raising a child on your own can be expensive. Housing, essentials, and extracurriculars add up. Add in unplanned days off for childcare, major expenses like dental work and medical insurance, or expenses like legal bills during a separation, and you may find yourself with your finances stretched thinner than you’d like.
One option to consider is a personal loan. This type of loan provides a lump sum of money up front you then pay back (plus interest) in monthly installments over time. You can use the funds from a personal loan for virtually any purpose, whether it’s making a large purchase, covering living expenses, or paying down other, higher-interest debt.
Read on for a closer look at personal loans for single moms, including their pros and cons, how to qualify, plus other funding options you may want to explore.
Why Might a Single Mom Need a Personal Loan?
There are many reasons why a single mother — or any parent — might consider applying for a personal loan. These include:
1. Consolidating debt
2. Covering the cost a move
3. Paying tuition or extracurricular expenses for children
4. Stopgap during times of unemployment
5. Covering housing costs, such as rent or a mortgage
6. Paying for a home remodeling project
7. Buying a car
8. Purchasing major appliances
Recommended: What Is a Personal Loan? How Do Personal Loans Work?
Are Personal Loans for Single Mothers Special?
In a word, no. The process of applying for a personal loan is the same for everyone. However, there may be particular approval hurdles to overcome as a single parent.
One is income. If you’re newly single, you may not have a steady income, which can make it more difficult to get approved for a personal loan. Another is your credit. If you’ve had to rely on credit cards to cover the cost of divorce or the transition to single parenting, your credit may not be what it used to be. The amount of debt you owe on your credit cards is one of the biggest factors affecting your credit score.
However, these obstacles aren’t insurmountable (more on that below).
Benefits and Risks of Personal Loans for a Single Mother
A personal loan can offer a single mom a valuable lifeline to meet immediate needs, such as unexpected expenses, education costs, or debt consolidation. However, taking on any type of debt generally comes with costs, as well as risks. Here’s a look at the pros and cons of getting a loan as a single mom.
Pros
Cons
Flexibility in fund usage
Interest and fees add to your costs
Quick access to funds
Risk of overborrowing
Fixed repayment schedule
Missed or late payments can negatively impact your credit
Interest rates are typically lower than credit cards
Can add to your debt burden
Pros of Personal Loans for Single Mothers
• Flexibility Personal loans provide flexibility in how you can use the borrowed funds. Whether it’s covering medical bills, home repairs, or summer camp tuition, personal loans can be used for a wide range of purposes.
• Quick access to funds Personal loans often come with a streamlined application process and relatively quick approval. You may be able to access the funds quickly, enabling you to address urgent financial needs promptly.
• Fixed repayment schedule Personal loans usually come with fixed monthly payments over a specified term. This predictability can make it easier for you to budget and plan your finances effectively.
• Potential for lower interest rates Depending on the borrower’s creditworthiness, personal loans can offer competitive interest rates compared to other types of borrowing, such as credit cards or payday loans. Single mothers with a good credit history may benefit from more affordable repayment terms.
Cons of Personal Loans for Single Mothers
• Interest and fees On top of interest, some lenders charge fees for personal loans, which increase the overall cost of borrowing. It’s important to carefully evaluate the terms and conditions to make sure you can comfortably manage the repayments without straining your budget.
• Risk of overborrowing As a single mom, you likely want to avoid overborrowing or taking on more debt than they can reasonably repay. Overcommitting to loan payments may lead to a cycle of financial stress and difficulty in meeting other essential expenses.
• Impact on credit score Taking out a personal loan creates a new line of credit, and if not managed properly, it could negatively affect your credit profile. Late or missed payments can damage creditworthiness, potentially impacting future borrowing opportunities.
• Debt burden A personal loan will add to your existing financial obligations as a single mother. Before opting for a loan, you’ll want to be certain to assess the long-term implications and consider whether the loan repayments align with your income and financial goals.
Is Getting a Personal Loan With No Income Possible?
If you’re a single mother with no job or you’ve been a stay-at-home-mother with little or no income of your own, it may be difficult, though not impossible, to qualify for a personal loan.
Lenders typically want to see proof of a regular income. However, that does not necessarily have to be job-related income. You may be able to count these other sources of income:
• Unemployment
• Alimony
• Child support
• Investment income
• Rental income
• Pension or annuity income
• Freelance work
• Gig work
If you don’t have much income to speak of, then you might consider a cosigner or co-applicant for your loan. This a person who agrees to make the loan payments if the main borrower cannot or does not. For some borrowers, family members have the financial flexibility to cosign on a loan, but it can be a good idea to have a conversation about expectations and potential hypotheticals if you were no longer able to pay back the loan.
Another option is to secure a personal loan with collateral. This is an asset of value, such as a vehicle or money in a savings account, you use to back the loan in case you default. Should you become unable to repay the loan, the lender can seize your collateral to recover their losses. This lowers risk for the lender, making steady income (or less-than-stellar credit) less critical.
Also keep in mind that if you have no income but excellent credit, you may still find a lender who is willing to offer you an unsecured personal loan.
You’ll also want to be wary, however, of lenders who advertise “No-Income Loans,” as these loans may come with sky-high interest rates, short repayment terms, and low loan amounts.
Alternatives to Personal Loans for Single Mothers
There are other alternatives to personal loans, depending on your financial circumstances and your needs. Here are some you might consider.
Home Loans for Single Mothers
If you own your home, using your home as a financial asset may be one way to borrow funds at a reasonable cost. If you have built up equity in your home, you may be able to tap that equity by getting a home equity loan or a home equity line of credit (HELOC). Just keep in mind that the loan is backed by your home. Should you have difficulty repaying the loan or credit line, you could potentially lose your home.
Government Resources for Single Parents
If your income is low, you may be eligible for one or more government assistance programs. Some options you may want to explore include:
• Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)
• National School Lunch Program
• Temporary Assistance for Needy Families (TANF)
• Low Income Home Energy Assistance Program (LIHEAP)
• The Emergency Food Assistance Program
You can find more resources at enefits.gov.
Educational Aid for Single Mothers
If you’re considering going back to school, below are some programs that can help make it more affordable (or even free):
• Pell Grants
• Teach Grants
• Women’s Independence Scholarship Program (WISP)
There also may be private scholarships and grants for single parents available from the institutions you’re interested in. Speaking with the financial aid office may help you see the breadth of options available to you.
Other Financial Help For Single Mothers
Becoming a single mother, either by choice or circumstance, can feel overwhelming. But there is support out there. It can help to talk to other single parents in your community — you may be surprised by all the resources that are available. Other opportunities may include:
• Financial aid or tuition assistance If your children are in private school or extracurricular programs, there may be financial aid available to help lower the cost. Even if there’s not a formal program, it can’t hurt to explain your situation and ask what may be available.
• Employer-based programs Your human resources department may have certain programs, such as childcare coverage, free legal consultations, and access to financial planning and debt counseling, for eligible workers. Talk to your HR representative or look through their materials to assess what’s available.
• Family and friends People close to you may be willing to provide support, or there may be creative ways to trade services, such as babysitting, to get more financial help. If a friend or family member offers to loan you money, it can be helpful to put an agreement in writing, including any interest you will pay and the terms of repayment, so there is no confusion that can cause a rift in your relationship.
Recommended: Options for When You Can’t Afford Your Child’s College
The Takeaway
As a single mother, there are avenues that can help you manage your finances and achieve your financial goals, including taking out a personal loan. This type of financing can provide financial relief and flexibility, but it is important to weigh the pros and cons, compare options from different lenders, and assess your ability to manage repayments responsibly.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.
Photo credit: iStock/RyanJLane
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Living off of minimum wage in this country is extremely burdensome: mentally, physically, and financially. As one Redditor puts it:
A nice dinner out with your significant other might seem like nothing to people who make more money than I do, but that is something I have to plan for. I have to pick up shifts at work and skip a meal or two in order to take someone out and feel “normal” for a few hours. But I get up and I do it every day because I have to.
However, with a little strategy applied, there are ways to alleviate your stress in the short term, multiply your earnings, and save for the long term.
Here are seven ways to improve your life and lifestyle while living on minimum wage.
What’s Ahead:
Create a budget
While I researched this piece, my friend Steph described a moment in the life of a minimum wage earner:
I used to love Campbell’s brand soup as a kid. Aldi stocks it right next to the generic brand soup, which is $0.40 cheaper. So I stood there for a good five minutes debating whether I could truly afford the name brand soup that I wanted. But eventually, I left the Campbell’s on the shelf.
Steph’s problem, as she put it, is that she doesn’t have a budget so she never knows how much she can really spend without feeling guilty.
It’s almost ironic that creating a budget can feel both scary and tedious at the same time. But having a budget on any wage is so critical because it provides two primary benefits:
First, budgeting ensures that you don’t overspend and end up with net zero or negative earnings at the end of the month, which can jeopardize your long-term goals of financial independence.
Second, when you create a budget, you’ll learn down to the dollar how much you can spend on nonessentials each month.
As someone who’s briefly lived on minimum wage (and no wage), I can assert that it’s really hard to live life when every non-essential purchase, like Campbell’s soup or a movie rental, is laced with guilt and fear of the unknown.
Part of designing a budget is determining how much you’ll allow yourself to spend on fun and happy things without feeling guilty. Even if it’s only $40 per month on nonessentials, that’s $40 you can spend guilt-free, which is so critical to supporting your mental health.
As for which budget to follow, consider the 50-30-20 budget:
50% of your income goes to essentials (bills, food, rent, utilities, etc.).
30%of your income goes to discretionary spending (entertainment, social life, etc.).
20%of your income goes to savings (investments, 401k, etc.).
Now, you might be thinking that well over 50% of your income is already going to your essentials. To be sure, you can use MU30’s 50-30-20 Budget Calculator to confirm your suspicions. If things are tight, consider shaving 10% off of the latter two categories so your budget plan becomes 70-20-10.
Once you’ve established a budget, it’s time to start storing your money in the right places.
Open some checking, savings, and retirement accounts
There are many American households that are either unbanked or underbanked, meaning they either have no bank accounts or they have an account, but rely upon outside/unscrupulous financial institutions like payday lenders to make ends meet.
Payday lenders are extremely dangerous places to do business and should be avoided, but more on that later.
The research found that the #1 reason why these households avoid banks is that they feel that they don’t have enough money. The #2 reason is that they simply don’t trust banks.
If you hold these beliefs, I get it. Banks do sketchy things, and overdraft fees are a pain. But the benefits of opening accounts with the right bank far outweigh the potential cons.
A checking account is critical for safely storing and accessing your money on a daily basis. It also enables you to make purchases with a credit card, which can help build positive credit. Lastly, having at least a checking account will enable you to set up direct deposit with work, which we’ll talk about below.
A savings account is a rainy day fund that accumulates a little interest (around 1.0% these days, compounded annually). If you have money that you won’t need immediately but may need before retirement, a savings account is a good place to keep it.
For a great starter mobile financial app, consider Chime®. They offer checking and savings accounts, and I don’t hesitate to recommend them to someone making minimum wage because they help you build credit and charge zero fees (their whole mission is to make money off of banks, not customers)2. Plus, they make it super easy to get started.
Finally, I strongly recommend setting up a retirement account. Even if you can only contribute a few bucks a month (or a year), that money will still multiply by a factor of 10-15 by the time you retire, so it’s much better than not having any retirement savings at all. Plus, in my experience, just knowing that I was saving something for retirement was a stress-reliever.
To open a retirement account and put a few bucks in, I recommend Betterment. It’s a “robo-advisor,” meaning it’s an AI that never sleeps, optimizing your investments 24/7. You can open an account with a $10 required minimum deposit to start investing, and Betterment charges an annual fee of just 0.25% of your account balance (so no “minimum balance” nonsense here).
2 There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account.
Set up direct deposit and automated bill pay
I mentioned direct deposit earlier as a benefit of a checking account. Why is that important?
Direct deposit is where you give your employer your account info so instead of writing a check, they can just directly deposit your pay into your bank account. Direct deposit is awesome because it means no more lost checks and you can get your money two-five days faster, and anyone living paycheck-to-paycheck knows that getting cash faster can make a huge difference at the end of the month.
Next, a checking account will also enable you to set up automatic bill pay. Most banks will have online dashboards where you can input recipients like AT&T and your landlord and set up automatic payments to them each month.
Now, AT&T and your leasing company might offer to automatically withdraw from your account when your bills are due, but I wouldn’t recommend this for two reasons. Let’s say you give your account and routing numbers to AT&T so they can automatically withdraw $50 each month. Regardless of how much money is in your account, AT&T will always try to withdraw $50, which could leave you without food/rent money or worse, overdrafted. Next, AT&T might simply make a clerical mistake and withdraw $500, and it can take a lot of red tape to get it back.
So instead, keep control of your automatic payments yourself so you can always quickly turn off the taps if you need to save money.
Avoid bad debt and build good credit
Never try payday loans
If you’ve ever considered taking out a loan from a payday lender, just don’t. Beg, borrow (but don’t steal) from friends and family before you walk into one of those places, because statistically, most people who take payday loans end up owing magnitudes more than they borrowed.
If you’re short on cash and friends and family couldn’t come through, you can also try Earnin. Earnin is a community-sourced app that lets you withdraw up to $100 per day from your next paycheck amount in advance. Most crucially, they don’t charge fees or interest.
Build good credit simply by getting your credit report
Next, you’ll want to start building some good credit. Your credit score is an indicator not of your wealth, but how likely you are to pay back a loan in time. Building good credit is essential because having good credit lowers your interest rates on future loans. Improving your credit score by just 100 in your 20s can help you save thousands on your car payment, or even a mortgage.
To start, you can check your credit score for free, with no strings attached, at Credit Karma. Also, you’ve probably read in the news about unscrupulous tax filing companies that dupe Americans into paying to file their taxes when it should be free. Well, Credit Karma Tax doesn’t mess around and lets you file your taxes easily, 100% free. Put a note on your calendar to head to Credit Karma Tax next April.
Build your credit by using a credit card responsibly
Aside from paying bills and loans on time, a great way to build good credit is to put your bills and expenses on a credit card. Yes, having a credit card with a big line of credit is a slippery slope for anyone regardless of income, but as long as you stick to your 50-30-20 budget and set up autopay, you’ll be fine.
Having a credit card while you’re living on minimum wage is a good idea because it can generate cash back on your existing daily expenses. I’m a massive fan of my Chase Freedom Unlimited® for this reason; it offers cash back in every category imaginable. You’ll start by earning 5% cash back on travel booked through Chase Ultimate Rewards®, 3% on dining and drugstores, and finally, 1.5% cash back on all other purchases. So there’s a little something for every category I spend in.
Plus, you can earn an additional 1.5% on all purchases (up to $20,000 spent in the first year).
Get some government benefits
If you’re struggling to make ends meet, you may qualify for some government support. The federal and state governments offer programs that provide food, utilities, healthcare, child care, insurance, phones, and more.
To see which benefits you might qualify for, visit benefits.gov.
You may also qualify to receive some help from a local non-profit group. For example, I recently did some work with Helping Mamas in Atlanta, Georgia, who supplies food, diapers, and other critical supplies to low-income mothers in need.
Do a little research and see what non-governmental resources might be available to you locally. You can also use Reddit and Facebook to connect with other minimum wage earners in your area to learn more about where others are seeking support.
Take classes, freelance, and increase your earnings
Did you know that some states offer community college for free, and most will offer scholarships to students with financial needs?
It may seem like an exhausting prospect to take classes on top of a 60-hour workweek, but learning an in-demand skill or trade at community college is the fastest way to transform your earnings into a liveable wage. According to CNN Money, graduates of a vocational program that took less than six months to complete earned an average salary of around $38,000 after graduation. If you get a two-year associate degree in STEM, you can earn twice that.
If you’re looking for a trickle of extra cash in the short term, ask yourself: is there one skill or favor that my friends keep asking me to do? Maybe it’s video editing, photography, public speaking, writing, moving, handiwork, etc. If so, start charging! Use sites like Facebook Marketplace, Nextdoor, and Upwork to list your services and start your fees above the minimums you see so people place value on your work.
Finally, if you’re already spending a lot of time gaming on your smartphone or surfing the web, you might consider earning a little extra cash on Swagbucks. Swagbucks is a safe, secure place where you can watch videos, take surveys, even play games in exchange for gift cards. It all equates to around $2 per hour so it’s less of an income stream than a trickle, but a little time on Swagbucks per day could cover a grocery bill or two.
Set some financial goals
Once you’ve taken the above steps to regain your financial footing and recoup some mental health, let’s set some financial goals.
There are plenty of “ducks in a row” apps out there that will help you organize your finances, stick to a budget, and set a reasonable goal (i.e. save for a down payment on a house) that you can track over time. However, my personal favorite and the one I recommend for minimum wage earners is PocketSmith.
PocketSmith is like a virtual financial assistant. In addition to helping you organize a crystal clear picture of your earnings and financial outlook, its most notable feature is financial forecasting. You can tell PocketSmith that you’re considering a big purchase like a new bike or a down payment on a car and it’ll actually show you how such a decision will impact your finances and savings goals.
Best of all, it offers these services, including forecasting, for free in its Basic Plan.
Summary
Living off of minimum wage is mentally and physically draining, but with some strategy, you can alleviate the stress in the short term and achieve financial independence sooner than you think.
For more on how to cut expenses and increase your earnings while on minimum wage, check out MU30’s article: How To Save And Invest When You Make Minimum Wage.
Odds are you hold at least some, if not all, of your money in a checking or savings account (or both).
Odds are you have at least one credit card (if you don’t, you should remedy that ASAP).
Odds are you have, or have had at one time, some type of loan — be it a student loan, an auto loan, a mortgage, or perhaps all of the above.
While you most certainly recognize these as products offered by banking institutions, you may not have known that none of them are free. Banks have to stay afloat somehow, and they do so in subtle ways like monthly maintenance fees on your checking account or interest on your auto loan.
Below, we’ll cover the ways banks earn money so they can continue to help you manage yours.
What’s Ahead:
How do banks make money?
When you think of a bank, what comes to mind? Checking accounts? Credit cards? Loans? Banks provide a wide range of services, but the most prevalent (and the most relevant to me and you) fall under two categories: money held for customers and money loaned to customers.
Banks need to earn some sort of revenue from these services, and they do so in two primary ways.
Fees
Fees are the main way banks make money on the cash they hold for customers.
If your checking account has a monthly maintenance fee, for example, it’s part of that bank’s income. If you recently traveled overseas, you may have noticed a fee for using your credit card abroad. This is a foreign transaction fee, and it’s another means of money-making.
Here are some examples of bank fees, many of which you’ve probably paid:
Monthly maintenance fees
Credit card fees
ATM fees
Foreign transaction fees
Overdraft fees
Interchange fees
Origination fees
Late fees
And so on…
Read more: How to stop paying ATM fees
Interest
Interest is how banks make money back on the cash they loan to individuals and businesses.
When you borrow money from your local bank to buy a new car, for example, the bank isn’t doing you a favor; they’re providing a service, and you have to pay for that service. The primary way you repay the bank for loaning you money is through interest.
Some of the products banks charge interest on include the following:
Home loans
Auto loans
Personal loans
Business loans
Student loans
Payday loans
Credit card debt
And so on…
Other bank income streams
While banks make a significant chunk of their income through various fees and interest, their revenue is truthfully much more diverse.
Banks also provide capital markets services, which essentially means they work with investors and businesses who need help with a range of financial activities. Some clients may need help funding a project. Others may need assistance with underwriting and/or building equity. Another business may require the support of an advisor or team of advisors through a merger or an acquisition.
Capital markets services are diverse, but they’re also inconsistent. This is why many banks lean more heavily on revenue from fees and interest.
Do all banks make money in the same ways?
In short, no.
While many banks bring in the bulk of their income through interest and fees, the weight they place on different income streams varies. This is because banks offer two types of services: commercial and investment.
Some banks focus on commercial banking. Some focus on investment banking. Others, but not all, offer products that fall under both categories, and those that do may make more money through one type of banking than another.
Knowing what your bank offers will help you understand why they charge the interest and fees they do.
Commercial banking
Commercial banking is likely more familiar to you, because commercial products are available for individuals and small to mid-sized businesses. In fact, when you hear the term “bank,” more often than not it’s in reference to a commercial bank. The products offered by a commercial bank include deposit accounts (checking and savings accounts) and loans (auto loans, home loans, etc.).
Read more: Which are the best banks?
Investment banking
Investment banking refers to products and services for the “big boys.” We’re talking corporations, high-net-worth individuals, and even governments. These institutions offer financial advice and wealth management, engage in trading activities, and more.
What about credit unions?
At a glance, it may seem like credit unions and banks are virtually the same, and in many ways they are. For instance, both charge customers interest and fees. One notable difference, however, is that credit unions are nonprofit businesses that are owned by their customers, while traditional commercial banks are owned by shareholders.
Read more: Credit unions vs. banks: Think local, save money?
The reason this difference matters from a money-making standpoint is that credit unions are only making enough to cover their own expenses, while banks are actually trying to make a profit. Consequently, credit unions are typically able to offer lower fees and interest rates for their customers.
This said, one of the major drawbacks to working with a credit union is they’re generally smaller than commercial banks, which means they have fewer branches to work with and fewer products.
Read more: The best credit unions
How to reduce your banking costs
Now that you have a clearer idea of how banks make money, you’ll be able to identify opportunities to reduce those funds. Here are two simple suggestions to trim your banking costs:
Pay attention to bank fees
While every bank must charge some fees and interest to stay in business, there are plenty of “fee-free” services you can consider to cut costs.
For instance, online banks are able to maintain lower costs since they don’t have to pay for physical branches. As a result, they can reduce — and sometimes even eliminate — certain fees, like monthly maintenance fees.
Read more: Online banking vs. traditional banking
Another easy fee to avoid is the overdraft fee; all you need to do is opt out of your bank’s overdraft protection and make sure you monitor your account balance to avoid spending more money than you have available.
Read more: Understanding overdraft protection and fees
Shop around before you buy
Banks may sell similar products, but they don’t all charge the same rates and fees.
As mentioned previously, for instance, online banks are able to offer customers reduced fees, because they don’t have to pay for physical branches. With this in mind, before you open a new credit card or take out a personal loan, make sure you spend some time shopping around and comparing options.
Read more: How to choose a bank
Summary
Believe it or not, your bank isn’t free.
Banks have to make money to stay in business, and they do so in a number of ways. If you have a checking account, you’re paying the bank in fees to store your cash. If you have a personal loan, you’re paying the bank in interest to borrow money. But not all banks have identical income streams and understanding how your bank makes money can help you learn how to trim costs for yourself.
Payday loans are also called cash advance loans, deferred deposit loans, post-dated check loans, or check advance loans. They are short-term, high-interest loans. People who use these loans tend not to have access to other types of lending, and this is a last resort to get them through to the next paycheck.
Many states consider these loans predatory because of their high interest rates and financing fees. Some states place caps on the fees and interest rates or ban this type of lending completely.
Read on to find out what a payday loan is, how they work, and other options for those who need a short-term loan or cash advance.
What Is a Payday Loan?
Payday loans, also known as cash advances, are high-interest, short-term loans, typically for $500 or less. They are notorious for having very high interest rates and fees. There are few payday loan requirements, but borrowers typically need to be over 18, have a checking account in good standing, and show that they earn a secure income.
Consumers can find these types of loans through online lenders, apps, and local brick-and-mortar merchants. The loan amount is typically paid back by direct debit once the borrower receives their next paycheck. Alternatively, loans may be secured with a post-dated check.
How Does a Payday Loan Work?
Consumers fill out an application with a lender and show proof of identity, a recent pay stub, and a bank account number if required.
Borrowers have to secure the loan with a post-dated check or agree to have the funds debited from their account when they are paid, usually in two weeks. Loans are usually between $50 and $1,000, and funds are deposited within a day or two. Borrowers can also receive cash.
People with bad credit and access to better financing tend to use these loans to help them get by temporarily. However, payday loan problems are well-known: High interest rates and exorbitant fees can trap someone in spiraling debt if they cannot repay the loan on time.
The Consumer Financial Protection Bureau states, “More than four out of five payday loans are re-borrowed within a month, usually right when the loan is due or shortly thereafter.” Borrowers then face even higher financing fees and interest rates compounding their debt load.
Many states place caps on the interest rates and fees charged for payday loans; some states, such as New York, have outlawed them completely.
What Are the Requirements for a Payday Loan?
Most working adults qualify for a payday loan. Here are the most common standards.
Age
Borrowers must be at least 18 years of age.
Proof of Income
Applicants have to show proof of income, such as a pay stub.
Citizenship
Consumers may have to show proof of U.S. citizenship.
Bank Account
Borrowers need to have a bank account that is in good standing.
Payday Loan Interest Rates
Depending on the state, interest rates for payday loans can carry a 400% annual percentage rate (APR) or more.
In states that cap interest rates on payday loans, lenders may instead charge a fee that is a percentage of the amount loaned. Finance charges can be between $15 and $30 for each $100 borrowed.
Payday Loan Amounts
Payday loan amounts are usually $100 to $1,000. In some states, a borrower is allowed only one payday loan at a time. Other states, like Texas and Nevada, offer unlimited payday loans for customers.
Alternatives to a Payday Loan
Rather than take out a high-interest payday loan, there are better options for people in a precarious financial situation.
Credit Cards
If the borrower has a credit score, using a credit card is a safer bet than a payday loan. The average credit card interest rate is around 22%, while payday loan interest can be over 400%. However, if the borrower needs the cash to pay bills such as rent or utilities, that is often not possible with a credit card.
Cash Advance Loans
A cash advance loan puts cash immediately into your bank account. These loans are offered by online lenders, such as Earnin or PayActiv. These companies don’t charge loan financing fees but ask for “tips.” So, a borrower might tip between 5 and 15% of the advance. These apps are often marketed as payroll benefits, and they charge membership and service fees.
TSP Loans
A TSP account is a tax-deferred retirement savings and investment plan that offers Federal employees the same tax advantages as a 401(k) retirement plan. If you have a TSP retirement account, you can take out a loan from that plan without having to pay tax or penalties. However, you must pay the amount back to the account within five years with interest (which will be much lower than the interest on a payday loan).
Personal Loans
For consumers with a good credit score, banks and online lenders offer unsecured or secured personal loans. Unsecured loans are not backed by any collateral and will have a higher interest rate than a secured loan, but not as high as a payday loan.
Unexpected expenses can be paid for with a personal loan and at a lower interest rate. Many people take out personal loans to pay off credit card debt because the interest rate on a personal loan is less than the interest rate paid on their credit card debt. Getting approved for a personal loan isn’t hard if you have good credit.
Loan payback terms can be between two to seven years, with loan amounts typically between $1,000 and $50,000. If you manage the payments on a personal loan responsibly, you can build up a strong credit history. That is not the case with a payday loan, which is not reported to credit rating bureaus.
Recommended: What Is a Personal Loan?
The Takeaway
Payday loans are short-term loans that cash-strapped consumers use to get by until their next paycheck. The borrower is expected to repay the loan on their next payday, or they may submit a post-dated check. Interest rates are extremely high because of the risk to the lender that the borrower will default. Unfortunately, this is often the case, and borrowers can find themselves spiraling into debt as interest and fees accumulate. For this reason, many states have banned payday loans.
Payday loans are probably the worst option for quick cash. But a SoFi Personal Loan offers fixed, competitive interest rates on loans from $5K to $100K. And there are no fees ever.
SoFi’s Personal Loan was named NerdWallet’s 2022 winner for Best Online Personal Loan overall.
FAQ
What are the requirements to get a payday loan?
Most working adults qualify for a payday loan. A borrower needs to be 18 or over, show proof of income (a paystub) and citizenship, and have a bank account.
Is proof of income a requirement for a payday loan?
A lender requires proof of income because they want to know you have the means to pay the loan back. A recent pay stub or similar documentation is typically enough.
Is taking out a payday loan a good idea?
Basically, no. A payday loan should only be used as a last resort, and if you are sure you can pay back the loan in two weeks. Even then, the interest you will pay will be much higher than a cash advance or a short-term loan from an online lender.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender. Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners. Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website . SOPL0322008
Cash advance apps have become a vital financial tool, offering a lifeline to those needing early access to earned wages. These apps allow users to borrow money ahead of their pay period, helping them bridge financial gaps and avoid costly overdraft fees or high-interest payday loans.
These apps function by connecting to a user’s bank account, tracking income, and spending patterns. Some require setting up direct deposit through the app. Once connected, users can request an advance on their paycheck, which typically lands in their bank account instantly or within a few business days.
Cash advance apps provide several benefits, including saving users from costly bank charges and providing budgeting tools and savings accounts. However, potential drawbacks include the possibility of falling into a cycle of debt and privacy concerns.
Despite these risks, cash advance apps, when used responsibly, can serve as a valuable financial management tool.
12 Best Cash Advance Apps
We’ve reviewed some of the best cash advance apps available, highlighting key features and who they might be best suited for.
1. Dave – Best for Small Cash Advances
Borrow up to $500 with no interest.
Dave checking account: No fees at 37K MoneyPass ATMs
Tools to help manage spending and anticipate upcoming expenses.
Automated savings: Automatically plans for future financial goals.
Bill alerts: Gives heads up on upcoming bills to prevent overdrafts.
Dave is a financial app well-suited for individuals who occasionally need a small, quick paycheck advance to tide them over until the next paycheck. It’s a reliable tool for managing finances and avoiding overdraft fees.
Dave allows users to borrow up to $500 as a cash advance to cover small expenses or to prevent an account from going negative.
Advances are provided without interest and are automatically repaid on your next payday. Funds are typically available within one to three days, though instant access is available if you choose to pay an express fee.
The Dave app also offers a checking account with no minimum balance, budgeting tools, and an automated savings feature.
The app also alerts users about upcoming bills, helping them better manage their finances and avoid unexpected charges.
2. Brigit – Best for Budgeting Features
Borrow up to $250 with no interest.
Credit builder loans to build credit
Auto-advance: Automatic cash infusion when your balance is low.
Expense forecasting: Predicts future expenses and warns against overspending.
No late fees or penalties: Offers a flexible repayment policy.
Brigit is a cash advance app that stands out due to its strong emphasis on financial tools, making it ideal for individuals who want to better manage their finances while having access to cash.
With Brigit, users can access cash advances up to $250 when their balance is low. The app features an auto-advance option, providing an automatic cash infusion when the user’s bank balance is in danger of dipping below zero.
Brigit also offers a free tool called ‘Finance Helper’ that provides a financial health snapshot and tracks your spending. The app’s algorithm also predicts future expenses and warns users if they’re at risk of overspending.
3. EarnIn – Best for Low Fees
Tip-based fee structure: Pay what you believe is fair.
Daily cash outs: Borrow up to $100 per day based on hours worked.
Balance Shield: Prevents overdrafts with automatic cash infusions.
No credit check: Your credit score isn’t affected by using the app.
Direct deposits: Pay is received directly into your checking account.
EarnIn stands out among cash advance apps for its low-cost structure, making it an ideal choice for those looking to avoid high fees.
Rather than charging a standard fee or interest, EarnIn operates on a tip-based system. This means that users can pay what they believe is fair for the service, even if that amount is zero.
This app works by allowing users to cash out up to $100 per day (up to $750 per pay period) based on the hours they’ve already worked. It’s a great tool to help avoid overdraft fees or cover unexpected expenses between paychecks.
EarnIn also integrates a Balance Shield feature that prevents overdrafts by offering a $100 cash infusion when the user’s bank account falls below a specific amount.
4. Chime – Best for Banking
SpotMe: Allows overdrafts up to $200 without overdraft fees.
Full-service banking: Includes checking and savings accounts with no monthly fees.
Early Direct Deposit: Access your paycheck up to 2 days early with direct deposit.
Automated Savings: Automatic rounding up of transactions to the nearest dollar with transfer to savings.
Secured credit card: Helps build credit score over time.
Chime is a full-service financial technology company that provides users with a banking platform.
Chime’s SpotMe feature allows eligible account holders to overdraft their accounts by up to $200 on debit card purchases without incurring an overdraft fee.
Additionally, Chime offers banking services provided by The Bancorp Bank and Stride Bank, including a no-fee checking account, an automatic savings account, and secured card offerings.
These services, combined with all of Chime’s other features, make it a well-rounded choice for individuals looking to streamline their banking experiences.
5. Current – Best for Quick Cash Advance Processing
Overdraft up to $200 with no fees.
Full-service banking: Provides checking accounts and savings tools.
Spending insights: Offers personalized breakdowns of spending habits.
Teen banking: Offers accounts for teens managed by parents.
No hidden fees: Current is upfront about all its charges.
Current is a comprehensive banking app that stands out due to its impressive speed in processing cash advances.
With Current, you can overdraft up to $200 without incurring overdraft fees. It also provides a checking account, savings tools, and personalized insights into spending patterns.
The lightning-fast processing times and user-friendly platform make Current a reliable choice for individuals who need speedy access to cash.
6. MoneyLion – Best for Comprehensive Financial Services
Instacash: Get up to $1,000 instantly with 0% APR.
Full-service banking: Offers a RoarMoney account for seamless banking.
Credit Builder Plus: Access to a secured credit card to help build credit.
Investment accounts: Provides an opportunity to grow your savings.
Credit monitoring: Keeps an eye on your credit score and provides advice.
MoneyLion sets itself apart as a financial technology company that provides a wide array of services, making it a standout for those seeking comprehensive financial tools in addition to cash advances.
MoneyLion offers a feature known as Instacash, which allows users to borrow up to $1,000 with 0% APR. The requested funds are transferred instantly to the user’s MoneyLion checking account, providing immediate financial relief.
MoneyLion also offers banking services, including a RoarMoney account and a secured card to help build credit.
Investment accounts are also part of its suite of services, making MoneyLion a one-stop solution for numerous financial needs.
7. Albert – Best for Personal Finance Management
Access up to $250 from your next paycheck.
Automated transfers to help you save money effortlessly.
Albert Geniuses: Subscribers can get personalized financial advice.
Keep track of your spending and set budget goals.
Invest in stocks and funds
Albert shines as a financial app focused on overall personal finance management while also offering a cash advance feature. This makes it an excellent choice for users who seek to enhance their financial literacy and stability.
Albert’s cash advance feature, Albert Instant, allows users to advance up to $250 from their next paycheck. This provides a handy buffer against unexpected expenses or potential overdraft fees.
Albert also offers an array of tools, including an automatic savings feature, budgeting help, and a subscription service that provides access to financial advisors for personalized advice.
Furthermore, Albert Geniuses, the app’s text-based financial advice feature, is a unique tool that helps users make more informed financial decisions.
8. Empower – Best for High Cash Advance Limits
Borrow up to $250* with no interest or late fees.
Free credit monitoring
Sets aside savings automatically based on your spending habits.
Spending tracking: Monitors spending to provide insights and alerts.
Personalized tips: Provides suggestions tailored to the user’s spending patterns.
Empower is an app that caters to those who might need larger cash advances, standing out with its high cash advance limits.
Empower offers qualified users advances up to $250* with no late fees or interest. The Cash Advance feature can be a lifesaver for individuals facing unexpected expenses or dealing with high living costs, providing a buffer until the next payday.
In addition, Empower provides a host of banking and financial services. It offers automated saving features and spending tracking to help users manage their finances more effectively.
* Eligibility requirements apply. Minimum direct deposits to an Empower checking account, among other conditions, may be required.
9. Payactiv – Best for Direct Deposit Advances
Direct deposit advances: Access up to 50% of earned wages before payday.
Financial counseling: Offers assistance to help manage finances.
Budgeting tools: Provides tools to monitor spending and set budget goals.
Discounts: Offers discounts on healthcare, retail, and commuting services.
Payactiv is a standout cash advance app for those seeking direct deposit advances, offering a unique system for accessing earned but unpaid income.
With Payactiv, users can access up to 50% of their earned income before payday, providing flexibility and a safety net for those with unpredictable expenses. This advance is automatically repaid from the user’s next paycheck, making it a seamless solution.
Payactiv also offers financial counseling, a Visa debit card, and a savings program. It also provides discounts for healthcare, retail, and commuting services.
Its comprehensive approach to financial wellness makes Payactiv a robust tool for managing personal finance.
10. Vola – Best for Students
Cash advances for students: Offers advances up to $300.
Financial learning resources: Provides educational content to enhance financial literacy.
Budgeting insights: Helps manage finances and plan for future expenses.
Overdraft prediction: Alerts users if they’re at risk of overdrawing their account.
Subscription model: Flat monthly fee provides access to all features.
Vola is a financial app specifically tailored to meet the needs of students, making it the ideal choice for students seeking cash advances.
The app understands the unique financial challenges faced by students and offers solutions to help them navigate their financial journey.
With Vola, students can borrow up to $300. It uses a subscription-based model, which also provides access to various financial tools and learning resources that are especially beneficial for students.
Vola also offers a suite of financial learning resources, money management tools, and an overdraft prediction feature.
These resources empower students to learn about personal finance management while providing a financial safety net when needed.
11. Kora – Best for User Experience
User-friendly: Simple and intuitive interface for ease of use.
Cash advances: Provides advances up to $500 to cover unexpected expenses.
Budgeting tool: Helps users manage their spending and save money.
Bill tracker: Helps users keep track of upcoming bill payments.
No hidden fees: Kora offers transparency in its fee structure.
Kora sets itself apart with its user-friendly interface and experience, making it the best choice for individuals who prioritize a seamless and intuitive user experience when it comes to cash advance apps.
With Kora, students can get up to $3,000, or as little as $25 to start building their credit history. The app’s interface is designed to be straightforward and easy to navigate, allowing users to request an advance with just a few taps.
Kora also offers financial planning tools, including a budgeting feature and a bill payment tracker. The simple, user-friendly layout makes it easy for users to manage their financial activity and plan ahead.
12. Varo – Best for No Overdraft Fees
Overdraft fee-free: Users are not charged for overdrafts.
Cash advances: Provides advances up to $250 to cover unexpected expenses.
Savings Account: Earn 5% APY on up to $5,000.
No hidden fees: Transparent about all charges and costs.
All-in-one banking: Combines a range of banking services in one app.
Varo is a standout for those who wish to avoid overdraft fees while getting cash advances. As a financial technology company that offers online banking, Varo’s cash advance app is an excellent choice for users seeking straightforward, cost-effective solutions.
With Varo, users can access a cash advance of up to $250. It’s also worth noting that Varo, unlike most cash advance apps, does not charge overdraft fees, making it a great option for those who are concerned about accruing extra charges.
Varo also offers a 5% APY savings account, allowing users to manage all their banking needs in one place.
Criteria for Evaluating Cash Advance Apps
When evaluating the best cash advance apps, several critical factors were considered to ensure a comprehensive and accurate review. These apps were assessed based on the following criteria:
Fees: The cost to use the app is a significant factor. This includes any charges for cash advances, subscription fees, late fees, or any other additional costs that could be incurred by the user.
User Experience: The design and functionality of the loan app plays a pivotal role in its effectiveness. A well-designed app should be easy to navigate, intuitive, and user-friendly. This includes the process of requesting a cash advance, accessing available features, and obtaining customer support.
Cash Advance Features: The primary function of these apps is to offer cash advances. Key considerations when assessing these features include maximum advance amounts, fees, repayment terms, and speed of delivery.
Additional Features: Many cash advance apps offer extra features, such as credit building tools, financial guidance, and more. These were evaluated based on their usefulness and how well they integrate with the cash advance function.
Customer Service: Good customer service is essential for any app. The availability, responsiveness, and helpfulness of the customer service team were considered.
Customer Reviews and Reputation: Online reviews and the overall reputation of the app provide insight into user satisfaction and potential issues.
Security: As these apps handle sensitive financial data, the security measures in place were evaluated to ensure they protect user information effectively.
By assessing each app based on these criteria, we aimed to provide a comprehensive overview to help you select the cash advance app that best suits your needs.
How to Choose the Right Cash Advance App for You
As you consider which cash advance app is right for you, it’s important to note a key difference between these apps and traditional payday lenders. Most cash advance apps do not charge interest, unlike payday lenders.
This makes cash apps typically a more cost-effective solution for short-term cash needs. Choosing the right cash advance app requires understanding your financial needs, habits, and goals. Here are a few steps to guide you:
Identify Your Needs: The first step is to define what you need from a cash advance app. Do you need a large advance, or will a small amount suffice? How quickly do you need access to the funds? Are you interested in the other features they offer?
Evaluate the Costs: Understanding the cost structure of the loan app is essential. Some apps might have high fees that can add up over time. Remember to consider both the upfront costs.
Assess the Features: Look beyond the cash advance function. Many apps offer useful features that can help you manage your finances better. Some have financial planning tools, bank accounts, and even financial education resources. If these features are important to you, they should be a significant factor in your decision.
Consider User Experience: The app should be easy to use and navigate. Read online reviews or try out the app to see if you find it user-friendly.
Check the Customer Service: Good customer service is crucial, especially when dealing with financial services. Check if the app provides timely and effective support when needed.
Think About Your Financial Future: Consider whether the app can grow with you. Some cash advance apps include features that can help you improve your financial health in the long term, such as bank accounts, credit building tools, or investment options.
By taking the time to consider these factors, you’ll be well-positioned to choose an app that fits your personal needs and helps enhance your financial situation. Remember, while cash advance apps can provide quick relief in times of need, they’re not a sustainable solution for financial difficulties. If you frequently find yourself needing to borrow money, it may be worth seeking advice from a financial advisor.
Bottom Line
Cash advance apps like Earning, Chime, and Current offer a variety of features and services to meet different financial needs. From low fees and banking features to high cash advance limits and user-friendly experiences, these apps provide convenient solutions for those in need of quick cash access.
The right app for you depends on your individual financial needs, habits, and goals. It’s crucial to consider the costs, available features, user experience, and customer service when choosing an app.
However, it’s important to remember that while these apps can provide immediate financial relief, they should be used responsibly. Cash advances are a temporary solution and not a replacement for sound financial management or long-term financial planning. Frequent reliance on money loan apps may indicate deeper financial issues that need to be addressed.
Lastly, remember to carefully read and understand all terms and conditions before using a cash advance app. Make sure you fully understand the app’s features, fees, and repayment terms can prevent unpleasant surprises down the line.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
We are going to under the cover and discover $13 an hour is how much per year.
For most Americans, this is hovering near minimum wage.
Let’s get this straight… This is not a livable wage.
If you are in high school or college and have support from your parents, then this is great spending money for you.
However, if you are making it on your own, $13 per hour will not make ends meet each month.
For most people, being at minimum wage is common and the goal is to make your way up the payscale and quickly!
In this post, we’re going to detail exactly what $13 an hour is how much a year. Also, we are going to break it down to know how much is made per month, bi-weekly, per week, and daily.
That will help you immensely with how you spend your money. Because too many times the hard-earned cash is brought home, but there is no actual plan for how to spend that money.
When living close to minimum wage, you must be know how to manage money wisely.
More than likely, you are living paycheck to paycheck and struggling to survive to the next paycheck. Take a deep breath and make this minimum wage just a season.
The ultimate goal is to make the most of your hourly wage with inspirations to make more money.
If that is something you want too, then keep reading. You are in the right place.
$13 an Hour is How Much a Year?
When we ran all of our numbers to figure out how much is $13 per hour is an annual salary, we used the average working day of 40 hours a week.
40 hours x 52 weeks x $13 = $27,040
$27040 is the gross annual salary with a $13 per hour wage.
Breakdown of 13 Dollars an hour is how much a year
Typically, the average workweek is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, multiple the hourly salary of $13 times 2,080 working hours, and the result is $27,040.
That number is the gross income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
Work Part Time?
But you may think, oh wait, I’m only working part time. So if you’re working part time, the assumption is working 20 hours a week at $13 an hour.
Only 20 hours per week. Then, take 20 hours times 52 weeks and that equals 1,040 working hours. Then, multiple the hourly salary of $13 times 1,040 working hours, and the result is $13,520.
How Much is $13 Per Month?
On average, the monthly amount would average $2253.
Annual Amount of $27,040 ÷ 12 months = $2,253 per month
Since some months have more days and fewer days like February, you can expect months with more days to have a bigger paycheck. Also, this can be heavily influenced by how often you are paid and on which days you get paid.
Work Part Time?
Only 20 hours per week. Then, the monthly amount would average $1,127.
How Much is $13 per Hour Per Week
This is a great number to know! How much do I make each week? When I roll out of bed and do my job, what can I expect to make at the end of the week?
Once again, the assumption is 40 hours worked.
40 hours x $13 = $520 per week.
Work Part Time?
Only 20 hours per week. Then, the weekly amount would be $260.
How Much is $13 per Hour Bi-Weekly
For this calculation, take the average weekly pay of $520 and double it.
$520 per week x 2 = $1040
Also, the other way to calculate this is:
40 hours x 2 weeks x $13 an hour = $1040
Work Part Time?
Only 20 hours per week. Then, the bi-weekly amount would be $520.
How Much is $13 Per Hour Per Day
This depends on how many hours you work in a day. For this example, we are going to use an eight-hour workday.
8 hours x $13 per hour = $104 per day.
If you work 10 hours a day for four days, then you would make $130 per day. (10 hours x $13 per hour)
Work Part Time?
Only 4 hours per day. Then, the daily amount would be $52.
$13 Per Hour is…
$13 per Hour – Full Time
Total Income
Yearly Salary (52 weeks)
$27,040
Yearly Wage (50 weeks)
$26,000
Monthly Wage (173 hours)
$2,253
Weekly Wage (40 Hours)
$520
Bi-Weekly Wage (80 Hours)
$1040
Daily Wage (8 Hours)
$104
Net Estimated Monthly Income
$1,720
**These are assumptions based on simple scenarios.
Paid Time Off Earning 13 Dollars an Hour
Does your employer offer paid time off?
As an hourly, close to minimum wage employee, more than likely you will not get paid time off.
So, here are the scenarios for both cases.
For general purposes, we are going to assume you work 40 hours per week over the course of the year.
Case # 1 – With Paid Time Off
Most hourly employees, get two weeks of paid time off which is equivalent to 2 weeks of paid time off.
In this case, you would make $27,040 per year.
This is the same as the example above for an annual salary making $13 per hour.
Case #2 – No Paid Time Off
Unfortunately, not all employers offer paid time off to their hourly employees. While that is unfortunate, it is best to plan for less income.
Life happens. There will be times you need to take time off for numerous reasons – sick time, handling an emergency, or even vacation.
So, let’s assume you take 2 weeks off without paid time off.
That means you would only work 50 weeks of the year instead of all 52 weeks. Take 40 hours times 50 weeks and that equals 2,000 working hours. Then, multiple the hourly salary of $13 times 2,000 working hours, and the result is $26,000.
40 hours x 50 weeks x $13 = $26000
You would average $104 per working day and nothing when you don’t work.
$13 an Hour is How Much a year After Taxes
Let’s be honest… Taxes can take up a big chunk of your paycheck. Thus, you need to know how taxes can affect your hourly wage.
This is why you always wondering why your take-home pay is so much less.
Also, every single person’s tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and a 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
Gross Annual Salary: $27,040
Federal Taxes of 12%: $3,245
State Taxes of 4%: $1,082
Social Security and Medicare of 7.65%: $2,069
$13 an Hour per Year after Taxes: $20,645
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$20645 ÷ 2080 hours = $9.93 per hour
After estimated taxes and FICA, you are netting $9.93 an hour. That is $3.07 an hour less than what you planned.
This is a very highlighted example and can vary greatly depending on your personal situation. Therefore, here is a great tool to help you figure out how much your net paycheck would be.
$13 an Hour Budget – Example
You are probably wondering can I live on my own making 13 dollars an hour? How much rent can you afford at 13 an hour?
Using our Cents Plan Formula, this is the best case scenario on how to budget your $13 per hour paycheck.
When using these percentages, it is best to use net income because taxes must be paid.
In this example, above we calculated that $13 an hour was $9.93 after taxes. That would average $1720 per month.
According to the Cents Plan Formula, here is the high level view of a $13 per hour budget:
Basic Expenses of 50% = $860
Save Money of 20% = $344
Give Money of 10% = $172
Fun Spending of 20% = $344
Debt of 0% = $0
Obviously, that is not doable when living so close to minimum wage. So, you have to be strategic on ways to decrease your basic expenses and debt. Then, it will allow you more money to save and fun spending.
To further break down an example budget of $13 per hour, then using the ideal household percentages is extremely helpful.
recommended budget percentages based on $13 per hour wage:
Category
Ideal Percentages
Sample Monthly Budget
Giving
10%
$68
Savings
15-25%
$135
Housing
20-30%
$676
Utilities
4-7%
$135
Groceries
5-12%
$203
Clothing
1-4%
$23
Transportation
4-10%
$135
Medical
5-12%
$225
Life Insurance
1%
$19
Education
1-4%
$11
Personal
2-7%
$35
Recreation / Entertainment
3-8%
$56
Debts
0% – Goal
$0
Government Tax (including Income Tatumx, Social Security & Medicare)
15-25%
$533
Total Gross Income
$2253
**In this budget, prioritization was given to basic expenses. Thus, some categories like giving and saving were less.
$13 An Hour Salary Calculator
Now, you get to figure out how much you make based on your hours worked or if you make a wage between $13.01-13.99.
This is super helpful if you make $13.12, $13.35, or $13.77.
Living on $13 Per Hour
Living close to minimum wage can be a very difficult situation.
Is it doable? Probably not for long.
You just have to be wiser (or frugal) with your money and how you spend the hard-earned cash you have been blessed with.
A lot of times when people are making under near the minimum wage mark, they feel like they are in this constant cycle that they can never keep up (which completely makes sense it is hard!).
When your thoughts are constantly focused on how you are struggling to keep up with bills and expenses, that is all you focus on.
You need to do is change your money mindset.
This is what you say to yourself… Okay, I am making near minimum wage for now. I have aspirations and goals to increase how much I make. For now, I am going to make sure that I am able to live on my 13 dollars per hour. I’m going to try and avoid debt and payday loans at all costs.
Other Tips to Help You:
Check your minimum wage for your state and city. You might find a higher minimum wage in a nearby city.
Look to living in a lower cost of living area to stretch your money.
Find ways to minizine your basic expenses.
Thrive with a minimalist lifestyle.
Decide if a roommate or moving back with your parents would help.
Bike or walk to work.
In the next section, we will dig into ways to increase your income, but for now, you must focus on living on $13 an hour.
5 Ways to Increase Your Hourly Wage
This right here is the most important section of this post.
You need to figure out ways to increase your hourly income because I’m going to tell you…you deserve more. You do a good job and your value is higher than what your employers pay you.
Even an increase of 50 cents to $13.50 will add up over the year. Even better $15 an hour!
1. Ask for a Raise
The first thing to do is ask for a raise. Walk right in and ask for a raise because you never know what the answer will be until you ask.
If you want the best tips on how specifically to ask for a raise and what the average wage is for somebody doing your job, then check out this book. In this book, the author gives you the exact way to increase your income. The purchase is worth it or go down to the library and check that book out.
2. Look for A New Job
Another way to increase your hourly wage is to look for a new job. Maybe a completely new industry.
It might be a total change for you, but many times, if you want to change your financial situation, then that starts with a career change. Maybe you’re stressed out at work. Making $13 an hour is too much for you and you’re not able to enjoy life, maybe changing jobs and finding another job may increase your pay, but it will also increase your quality of life.
3. Find a New Career
Because of student loans, too many employees feel like they are stuck in the career field they chose. They feel sucked into the job that they don’t like or have the potential they thought it would.
For many years, I was in the same situation until I decided to do a complete career change. I am glad I did. I have the flexibility that I needed in my life to do what I wanted when I needed to do it. Plus I am able to enjoy my entrepreneurial spirit.
4. Find Alternative Ways to Make Money
In today’s society, you need to find ways to make more money. Period.
There is no way to get around it. You need to find additional income outside a traditional nine-to-five position or typical 40 hour a week job. You will reach a point where you are maxed on what you can make in your current position or title. There may be some advancement to move forward, but in many cases, there just is not much room for growth.
So, you need to find a side hustle – another way to make money.
Do something that you enjoy, turn your hobby into a way to make money, turn something that you naturally do, and help others into a service business. In today’s society, the sky is the limit on how you can earn a freelancing income.
5. Earn Passive Income
The last way to increase your hourly wage is to start earning passive income.
This can be from a variety of ways including the stock market, real estate, online courses, book sales, etc. This is where the differentiation between struggling financially and being financially sound happens.
By earning money passively, you are able to do the things that you enjoy doing and not be loaded down, with having a job that you need to work, and a place that you have to go to. And you still make money doing nothing.
Here is an example:
You can start a brokerage account and start trading stocks for $50. You need to learn and take the one and only investing class I recommend. Learn how the market works, watch videos, and practice in a simulator before you start using your own money.
One gentleman started with $5,000 in his trading account and now has well over $36,000 in a year. Just from practice and being consistent, he has learned that passive income is the way for him to increase his income and also not be a slave to his job.
Tips to Live on $13 an Hour
In this last section, grasp these tips on how to live on $13 an hour. On our site, you can find lots of money saving tips to help stretch your income further.
Here are the most important tips to live on $13 an hour. Highlight these!
1. Spend Less Than you Make
First, you must learn to spend less than you make.
If not you will be caught in the debt cycle and that is not where you want to be. You will be consistently living paycheck to paycheck.
In order to break that dreadful cycle, it means your expenses must be less than your income.
And when I say income, it’s not the $13 an hour. As we talked about earlier in the post, there are taxes. The amount of taxes taken out of your paycheck is called your net income which is your home $13 an hour minus all the taxes, FICA, social security, and medicare are taken out. That is your net income.
So, your net income has to be less than your net income.
2. Living Below Your Means
You need to be happy. And living on less can actually make you happier. Studies prove that less is better.
Finding contentment in life is one thing that is a struggle for most.
We are driven to want the new shiny toy, the thing next door, the stuff your friend or family member got. Our society has trained you that you need these things as well.
Have you ever taken a step back and looked at what you really need?
Once you are able to find contentment with life, then you are going to be set for the long term with your finances.
Here is our story on owning less stuff. We have been happier since.
3. Make Saving Money Fun
You need to make saving money fun. Period.
It could be participating in a no spend challenge for the month.
Check out the 200 envelope challenge (which is doable on your income)
It could be challenging friends not to go to Target for a week.
Maybe changing your habits and not picking up takeout and planning meals.
Whatever it is challenge yourself.
Find new ways of saving money and have fun with it.
Even better, get your family and kids involved in the challenge to save money. Tell them the reason why you are saving money and this is what you are doing.
Here are 101 things to do with no money. Free activities without costing you a dime. That is an amazing resource for you and you will never be bored.
And you will learn a lot of things in life you can do for free. Personally, some of the best ones are getting outside and enjoying some fresh air.
4. Make More Money
If you want if you do not settle for less, then find ways to make more money. If you want more out of life, then increase your income.
You need to be an advocate for yourself.
Find ways to make more money.
It could be a side hustle, a second job, asking for a raise, going to school to change careers, or picking up extra hours.
Whatever path you take, that’s fine. Just find ways to make more money. Period.
5. No State Taxes
Paying taxes is one option to increase what you take home in each paycheck.
These are the states that don’t pay state income taxes on wages:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
It is very interesting if you take into account the amount of state taxes paid compared to a state with income taxes.
Also, if you live in one of the higher taxed states, then you may want to reconsider moving to a lower cost of living area. The higher taxes income tax states include California, Hawaii, New Jersey, Oregon, Minnesota, the District of Columbia, New York, Vermont, Iowa, and Wisconsin. These states tax income somewhere between 7.65% – 13.3%.
6. Stick to a Budget
You need to learn how to start a budget. We have tons budgeting resources for you.
While creating a budget is great, you need to learn how to use one.
You do not have to budget down to every last penny.
You need to make sure your expenses are less than your income and you are creating sinking funds for those irregular expenses.
Budget Help:
7. Pay Off Debt Quickly
The amount that you pay interest on debt is absolutely absurd.
Unfortunately, that is how many of these companies make their money is from the interest you pay on debt.
If you are paying 5% to even 20-21% or higher, you need to find ways to lower that debt quickly.
Here’s a debt calculator to help you. Figure out your debt free date.
Make that paying off debt fast is your target and main focus. I can tell you from personal experience, it was not until week paid off our debt that we finally rounded the corner financially. Once our debt was paid off, we could finally be able to save money. Set money aside in separate bank accounts and pay for cash for things.
It took us working hard to pay off debt. We needed persistence and patience while we had setbacks in our debt free journey.
Jobs that Pay $13 an Hour
You can always find jobs that pay $13 per hour. Polish up that smile, fill out the application, and be prepared with your interview skills.
Job Search Hint: Always send a written follow-up thank you note for your interview. That will help you get noticed and remembered.
First, look at the cities that require a minimum wage in their cities. That is the best place to start to find jobs that are going to pay higher than the federal minimum wage rate. Many of the cities are moving towards this model so, target and look for jobs in those areas.
Possible Ideas:
Cashiers
Back of the house restaurant staff
Landscape Laborer
Retail jobs
Paraeducators at schools
Janitors
Farm help
Warehouse workers
Fast Food Restaurants workers
$13 Per Hour Annual Salary
In this post, we detailed 13 an hour is how much a year. Plus all of the variables that can impact your net income. This is something that you can live off.
How much is 13 dollars an hour annually…
$27,040
This is under $30000 per year and you need to make at least $45k a year.
In this post, we highlighted ways to increase your income as well as tips for living off your wage.
Use the sample budget as a starting point with your expenses.
You will have to be savvy and wise with your hard-earned income. But, with a plan, anything is possible!
Learn exactly how much do I make per year…
Know someone else that needs this, too? Then, please share!!
The Dave app is a personal finance service including a bank account with no fees for overdrafts. It doesn’t require a minimum balance, and users can access a short-term $500 advance if necessary.
Users can withdraw from ATMs, and the app sends updates on side-hustle opportunities. It provides notifications to help users manage their money sensibly.
Life has a habit of throwing curveballs, and if you’re like most of us, you’ve found yourself with unexpected expenses when your bank account is running low, putting you in danger of overdraft fees.
Cash advances can be your lifeline in the last week or so before your pay comes in. But many payday lenders charge interest that pulls you deeper into debt.
Dave claims to provide the advance you need until your next paycheck is paid without exorbitant fees. At present, around millions of people are registered with Dave..
Here’s our Dave app review.
What’s Ahead:
What is Dave app?
Three friends were dissatisfied with certain aspects of traditional banking, especially overdraft fees, due to difficulty monitoring monthly expenses and their remaining bank balance.
Backed by celebrity investor Mark Cuban, they developed the Dave cash app as a “David vs. Goliath” solution for the majority of Americans to avoid overdraft fees and exorbitant payday loans.
With Americans paying as much as $12.4 billion in overdraft fees in 2020, such an innovation addressed a real consumer pain point.
Dave app is an entirely mobile platform available for iPhones running iOS (download from Apple App Store) and Android phones (download from Google Play Store). It isn’t available on computers.
Get Dave app here.
Pros and cons
Pros
No credit check to qualify
ExtraCash™ advances up to $500
Easy sign-upprocess and instant access to advances
No overdraft fee (settlement cheaper than overdraft fees)
No low balance fees
Potentially low fee/zero-fee way of borrowing money
Very useful for occasional emergency expenses
Early direct deposit funds
Round-the-clock support from trained financial professionals
Dave Spending Account and Dave Debit Card may not be used for internet gambling
Cons
Problems with transfers or deposits into your account can result in it becoming overdrawn (this must be rectified within 60 calendar days)
$1/month Dave membership fee (although compared to most monthly fees, this is low).
Tips are optional, however they are effectively interest on the advance if you choose to leave a tip
Instant access to cash advances in your Dave account or another account requires you to pay express fees
Dave requires bank account access (if you use it in addition to your existing bank account) You must share your Social Security number or Tax Identification Number
Using Dave may encourage people to borrow money against future earnings rather than accumulating emergency savings
Short repayment terms
How the Dave app works
The Dave app is a fully mobile interface for banking products provided by the financial institution Evolve Bank & Trust, partnering with Dave Inc.
It has two main products: a spending account and Extra Cash. The spending account functions as a checking account and you can get your direct deposit up to two days early if you choose to have your direct deposit sent there.
ExtraCash allows you to get an advance of up to $500 that is paid back automatically on your next payday. For a small fee, you can spend it out of your spending account with your Dave debit card or transfer it to another checking account for free.
Learn more at the Dave app website.
The Dave account: Setting up a bank account
Download the Dave App and link your bank account to determine whether you qualify for an ExtraCash advance.
Dave spending account
This account is Dave’s primary product. Calling it a spending account emphasizes that it is similar to a checking account, without checking. Evolve charges no overdraft fee or low-balance fees.
You can use this account alone or with a linked bank account. The linked account may be a checking account or another type of bank account, such as a savings account.
The Dave Debit Card, backed by Mastercard®, is linked with this account, and you can make debit card purchases with it like with any other debit card and withdraw from MoneyPass® ATMs.
You can use your Dave Debit Card in Canada, Mexico, and the UK to pay or withdraw cash from ATMs; foreign transaction fees apply for both uses as specified in the deposit account agreement.
The app provides you with a Virtual Dave Debit Card on your phone.
The Dave Rewards program, linked to the Dave Debit Card, offers cashback opportunities for spending ExtraCash advances via this card.
Learn more at the Dave app website.
Set up an ExtraCash account
Within the Dave app, will answer some verification questions and then you can set up an ExtraCash Account.
Qualification requirements for an ExtraCash advance
Dave uses a proprietary underwriting model to analyze your bank account for markers of financial health so as not to plunge you into a worse financial position.
This model determines your monthly income, account balance, and typical spending habits and uses this information to decide whether or not you qualify for a advance and how much. It does not do a credit check with the credit bureaus.
Your bank account must be at least 60 days old, have a minimum of three recurring deposits, and monthly deposits must total at least $1,000.
You must also verify your identity.
You may use the money for rent, gas, buying a Black Friday special, attending a friend’s wedding, and other personal and household expenses that can’t wait till the next payday.
However, you may not cover business or educational expenses with this money.
Does Dave app give you money instantly?
When requesting a advance from Dave’s ExtraCash account, you can elect to send money to any account you wish at no charge (but a two to three business day period to clear), or you can access funds instantly.
With express delivery, you can send it to your Dave Account, where it is available within minutes, or to an external bank account and external debit card, within an hour.
However, this instant access to cash requires you to pay an express fee that depends on the amount of the transfer money, with transfers to external bank accounts costing more than those to a Dave Spending Account.
How much eoes Dave let you advance?
The service has gradually increased the advance amount. Although a maximum of $75 is often quoted online, this amount is outdated, and the current maximum advance Dave offers is $500.
The average cash advance offered as of October 10, 2022, was $120. Eligibility on your account resets at midnight.
Learn more at the Dave app website.
How long do you have to pay Dave back?
When you take an advance, your ExtraCash Account balance goes into the negative; the agreement between you and Dave is that you will return the balance in this account to $0 (settle the account).
If you have a fixed pay period, you will be required to settle on your paydays; should you have no fixed pay period, you must usually settle on the nearest Friday after you take the advance. Users who cannot settle at these times incur no late fees for settling later; the platform may take partial payments to cover the amount advanced.
Once your settlement has reflected, bringing the balance back to $0, you could beeligible for another advance. You can have a positive balance in your ExtraCash account, up to a maximum of $500.
How much must you pay back to Dave?
On your settlement date, or as soon as possible afterward, you must repay the advance, any express fee for immediate access to cash, and a tip (the app defaults to 10%; you can set it to anything between 0% and 25%).
This tip allows you to reward Dave for helping you while remaining in control of your expenses. A portion of your tip goes to Feeding America, which feeds the hungry via a network of community food banks.
In addition, Dave charges a monthly fee of $1. As a result, these are not entirely free advances, but they are still more affordable advances than traditional payday loans.
Dave app features
The app has several useful features for savers. Let’s take a look.
Insights
Insights provide automatic account monitoring that analyzes your paycheck or wages, monthly debits for rent, utilities, and other services, and your monthly average spend on things like gas and food.
You can also manually add expenses to the tool. The budgeting tools let you view your budget and see how much you can still spend before your next paycheck is paid into your savings account.
Dave’s notification services can send you a warning text if a bill could put you in danger of an overdraft fee.
Learn more at the Dave app website.
Side hustle
If you regularly find yourself anxiously waiting for the next payday to come, why not take on a side job to earn a bit more money?
Dave has partnered with scores of partner businesses that offer flexible, local jobs in your area through Dave’s Side Hustle feature. You can also fill out Dave Surveys and get paid for each survey completed.
Early direct deposit
Depending on your employer’s specific payroll policies, Dave may be able to get you access to your paycheck up to two days early via an early direct deposit.
Dave app fees
For a $1 monthly membership fee, Dave analyzes your spending patterns to predict whether you’re in danger of becoming overdrawn and avoid an overdraft fee by giving you a advance of up to $5o0.
The app itself has no minimum balance requirement, late fees, or overdraft fees (although it is possible for your account to become overdrawn).
You can withdraw money at 37 thousand MoneyPass ATMs nationwide, with no ATM fees. When repaying advances (a process referred to by Dave as settlement), you are encouraged to leave a tip (between 1% and 25% of the advance amount).
Learn more at the Dave app website.
What people are saying about Dave app: Customer reviews
The Dave app has 575.8k ratings on Apple App Store, with an average rating of five stars. On Google Play Store, 426k people have rated this app, with an average rating of four-and-a-half stars.
Is Dave right for you?
Being a Dave member can be very useful if you have occasional small emergency expenses; you can use the advances instead of personal loans that would take longer to apply for and access.
It is also a money-saver when you use it to avoid overdraft fees that would otherwise gobble up an appreciable chunk of your pay.
However, using it as an adjunct to an emergency savings account is best.
Ensure that your next paycheck will cover the settlement and your monthly expenses and that you have a checking account that receives recurring direct deposits.
Get started with the Dave app.
Who the Dave app isn’t right for
The Dave app isn’t right for everyone. If you know you have a habit of spending more money than you earn, you should know that the app isn’t a quick fix for these habits. Dave’s advance feature is also not ideal if you need same-day cash with low repayments (due to the express fees Dave charges). Same-day personal loans are probably a better solution in this case.
If you need a longer repayment term than the service offers, personal loans or a credit card are a better option.
Some people prefer not to share their bank account details, Tax Identification Number, or Social Security number with Dave.
Is Dave a trustworthy app?
Dave uses various banking-level security measures, such as 2048-bit encryption, to protect data transmission (including your SSN and password). Banking credentials are used once for authentication purposes.
The data center housing the Dave servers is monitored by security personnel around the clock. Independent security experts are engaged to assess and test site security.
FDIC insures every account up to $250,000.
Get started with the Dave app.
Dave vs. other cash advance apps
Here’s a quick comparison of the app versus similar services.
Dave vs. Earnin
Earnin gives cash advances up to $500/month, but its fees are not transparent.
Earnin also requires users to provide an electronic timesheet or geographic location data to confirm that they’ve been working.
Here’s our full Earnin review.
Dave vs. Brigit
Brigit also offers budgeting tools and cash advances up to $250. However, its monthly fee is $9.99, and its encryption is only 256-bit.
Learn more at Brigit.
Dave vs. Branch
Branch offers advances up to $150/day or a maximum of $500 of your paycheck, but you may not work remotely.
Learn more at Branch.
Summary
The Dave app provides a basic yet effective debit account with a low monthly fee, an associated debit card, an insightful budgeting tool, and advances that help you pay for an emergency or avoid overdraft fees.
Download the app and sign up today!
*ExtraCash™ is a DDA account with overdraft utility, advances are subject to eligibility requirements and identity verification. Taking an ExtraCash™ advance will make your account balance negative. Express delivery fees apply to instant transfers. Average approved advance is $120 as of October 10, 2022. See the Extra Cash Account Agreement for more details.
**Early access to direct deposit funds depends on timing and availability of the payroll files sent from your employer. These funds can be made available up to 2 days in advance.