A Guide to Earnin App for Getting Your Paycheck Early

Although the Earnin app is popular with people living paycheck to paycheck, it may be charging deceptive fees and interest.

What is Earnin App?

The Earnin app was founded in 2012 to allow workers access to their earned income as often as they want, rather than waiting for payday. While most American workers are paid every two weeks, Earnin allows users to access their earned income right away. For the nearly 80 percent of American workers who live paycheck to paycheck, having access to their money as soon as they leave work may equate to paying less in fees for overdraft charges or short term loans. However, Earnin is under investigation for potentially violating lending laws by charging predatorily high interest rates and disguising these Earnin app fees as “tips”.

How Does the Earnin App Work?

Earnin works by allowing users to withdraw a percentage of their earned wages before their paycheck has been deposited. It does this by verifying workers’ hours, salaries, or gigs, and encouraging workers who use the app to leave a tip or pay voluntary sums of money to cover the cost of running the app.

The Earnin app verifies workers’ eligibility to receive payment by tracking a salaried worker’s location to ensure that the person went to work. The app also requires hourly workers to upload photos of their timesheet or connect with the app via their online timekeeping system.  Gig workers can verify their work by uploading photos of their task receipts.

Once the Earnin app has verified that the worker is qualified to receive funds, it deposits the amount into the worker’s bank account. This is called “cashing out.” The app will then nudge the user to add a voluntary tip of up to $14. The app also encourages users to “pay it forward,” or leave a larger tip in order to cover the cost of operations for users who do not leave tips. The amount that the user has cashed out is then deducted from their paycheck when it deposits and is sent to Earnin.

The app also offers additional features, such as a layer of protection against overdrafts, and assistance negotiating medical bills or payment plans for debt.

What Are the Earnin App Fees?

According to Earnin, the app does not charge interest or fees for users who withdraw money before their paycheck has posted, other than a fee of at least $1.50 that’s required for using Balance Shield, a feature that protects users from overdraft fees by automatically depositing up to $100 to their bank account if their balance drops below $100.

But according to at least one class action lawsuit filed against the company, Earnin may be disguising interest and fees by referring to them as “tips.” While an Earnin customer who tips $5 on a $100 cash out may feel as though this is a small cost to use the service, this may actually be a high annual percentage rate (APR) since this $5 tip is equivalent to 130 percent APR. In contrast, the average APR for a credit card is 18.20 percent.

Additionally, some consumers claim that while Earnin refers to tips as voluntary, those who decline to do so are punished. One consumer claims that his cash out limit was decreased by $100 in the same week that he declined to leave a tip. This contradicts Earnin’s statements about tipping, which assure users that leaving a tip is voluntary and will not affect the amount of money they may cash out. Additionally, some consumers claim that Earnin may be operating illegally by offering payday borrowing in states that prohibit the practice. As Earnin doesn’t technically charge interest or fees on funds that users cash out, the app is not registered to act as a lender and is able to skirt federal laws regulating lenders.

How Does Earnin App Make Money?

Earnin’s website states that the app is 95 percent community-supported and relies on voluntary tips to operate. Approximately 80 percent of people who use the app choose to leave a tip, resulting in some $8 million in monthly revenue for the company, according to NBC News.

If you use Earnin and believe that you were punished for not tipping, or were charged predatory fees or interest disguised as tips, you may be eligible to speak to a qualified attorney about your legal options. Some consumers may be eligible to file an Earnin lawsuit and pursue reimbursement for these charges as well as additional compensation.

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This article is not legal advice. It is presented
for informational purposes only.