Whether you earn a low income, you have a lot of debt, or you just have a lot of financial obligations, you probably know what it feels like to run your checking account balance close to zero. Figuring out how to break the paycheck-to-paycheck cycle can seem nearly impossible.
You either pay late fees on your bills, or you run the risk of getting hit with an NSF (non-sufficient funds) fee from your bank. You may end up at a check-cashing outlet, just to be sure you have the money to pay rent and other necessary bills on time. In a worst-case situation, you end up piling up credit card debt or taking out payday or title loans to cover regular expenses.
Is there a better way to cover the gap between when you need money and when your paycheck clears? The founders of Brigit, a financial wellness company, are working to make a better and cheaper option for all earners — even those with low incomes. Here’s what you need to know about the app that acts as a “cash safety net.”
- Overdraft protection and online lending
- $9.99 per month fee
- A good solution for people struggling with overdrafts
How Brigit Works
Brigit is an app that allows one user to connect one bank account to the app. Brigit uses an algorithm to predict whether that bank account will run out of cash before the next paycheck. If it predicts that you’ll run out of money, Brigit will send you up to $250 which you repay once you get paid.
You’ll also have to pay a $9.99 fee each month for the ability to borrow.
Ideally, Brigit will prevent you from paying NSF fees to your bank, plus you’ll be able to avoid most late fees and avoid taking on payday loans or credit card debt. Since Brigit is based on a subscription model, you’ll never pay interest or late fees on the loan that is up to $250.
Once you repay the loan, if you need it again, you’ll get it again. This is all included in your monthly fee.
Qualified borrowers may also request a loan from Brigit.
To qualify for Brigit, you must have a U.S.-based bank account, and you must earn a regular income (generally a W-2 job). You don’t have to have good credit (or any credit) to qualify for the program.
Does Brigit Work?
Being a relatively new app, Brigit still seems to be working out some technical issues. On both the Google Play store and the App Store, reviews from users are polarized. Some people get the necessary funds right away, and are thankful for the free loan from Brigit. Others never receive the money, or the money comes later than expected.
Brigit isn’t available in every state right now, so you may have to a join a wait list if it’s not available where you live.
While the customer service team at Brigit is responsive (to both comments in the App Store and to emails), it’s probably a bit risky to count on funds from Brigit right now.
How Much Does Brigit Cost?
Brigit users pay $9.99 as a monthly subscription fee. I went through all of my bills, and only found one bill that had an effective late fee less than $9.99; so in that sense, Brigit is a pretty good deal. On top of that, Brigit is much less expensive than an overdraft fee (about $20 to $40 depending on where you bank).
That said, the effective interest rate on a three-day loan can be astronomical. If you have access to a credit card, you would probably be better off taking on debt than using Brigit (although the cash advance on a credit card could leave you at a wash in terms of fees).
Are There Good Alternatives to Brigit?
Right now, Brigit is one of the only low-cost, small-dollar loan options in the market. The fact that it’s specifically designed for people with thin or low credit scores makes it an even better product.
However, Brigit isn’t perfect, and ideally, you’ll want to graduate away from using it. To do that, you need to have your financial house in order. The best way to do that is to start by opening a bank account without fees. Right now, Chime has one of the few checking accounts that has no monthly fee, no minimum balance, and no overdraft fee options (however, many people report issues with customer service). Simple is another no-fee bank that could work for some people.
On top of that, you’ll want to start building a credit score, so you can take out a 0% APR credit card. 0% APR credit cards offer promotional interest rates of 0% for a limited period of time. You can use these credit cards to “float” expenses for a few days until your paycheck hits.
Once you get rid of banking fees and interest charges, the best thing to do is to work on increasing your income (negotiate your salary or start a side hustle) or decreasing other expenses. That is the only long-term sustainable solution to solving the paycheck-to-paycheck cycle.
Final Take on Brigit
Brigit is working to solve a really complicated problem. I think the company deserves major accolades for addressing the problems of underbanked people in the United States. If you need some financial help from time to time, Brigit is a decent option . . . it’s certainly better than causing an overdraft, taking out title loans, or taking out a payday loan.
Just know that Brigit is a temporary lifeline. In the long run, you must increase your income and possibly decrease your expenses to make your money work for you. Brigit is one step in the right direction, but it’s only the first step. You can also see how Brigit compares to the top personal loan options.