‘Dave’ Could Be Your New Best Friend When it Comes to Avoiding an Overdraft

Overdrafting ranks up there with bumper-to-bumper traffic and running out of coffee: the worst.

Making a $10 mistake — to pay $35 in fees? How do they get away with this stuff?

Unfortunately, no matter how much you complain, you’re probably not going to change bank policy.

But you might have another solution: Dave.

No, not your coworker, or your old roommate, (though the founders do want you to think of Dave as a friend). It’s an innovative app that could prevent you from overdrafting.

The Big Deal With Overdrafting

When Jason Wilk, Dave’s co-founder and CEO, was in college, he overdrafted constantly.

“All the founders experienced overdraft fees,” says Wilk. “We saw it as a recurring problem.” Not only for themselves, either; they frequently saw overdraft woes pop up in the news or on Reddit.

And it’s no wonder. Overdraft and ATM fees cost customers at America’s three biggest banks $6.4 billion in 2016, according to an analysis by CNNMoney.

“The average expense amount that triggers an overdraft fee is $25,” Wilk says. “There needed to be a product that helps people maintain their expenses and avoid those small negative pitfalls.”

So Wilk and his friends decided to create an app to alleviate the problem. Also on board? Billionaire investor Mark Cuban, who had backed a few of Wilk’s previous companies.

“[Cuban] himself used to overdraft a lot when he was trying to make it,” says Wilk. “He became our lead investor in the seed round.”

How Dave Prevents You From Overdrafting

In April 2017, Wilk and his co-founders launched Dave, and today, the app has more than 400,000 users who each pay $1 per month.

Here’s a basic overview of what it does:

  • Assesses your income and spending patterns, then predicts how low your balance could get between now and your next paycheck.
  • Sends a warning if you’re at risk of overdrafting due to an upcoming predicted expense.
  • Calculates your cash flow at the end of each month: how many dollars came in and how many dollars went out (via your checking account).

Or, as Wilk says, “We’re thinking about it as Mint.com [a money-management tool] for the paycheck-to-paycheck world.”

How to Get On Board With Dave

To use Dave, you must first download the app (iOS/Android) and connect your checking account. Dave will then assess your income and expenses and attempt to establish patterns.

Say your cable bill is paid on the 11th of each month. Once Dave sees that, it will automatically set that bill up as a predicted expense.

You can also take matters into your own hands by turning your regular purchases into predicted expenses. If you go to lunch with the girls every month, for example, add it in so Dave will account for it.

If, at any point, your balance is going to dip dangerously low or a predicted expense may cause you to overdraft, Dave will warn you through a notification on the app.

“Because you’re taking control and adding predictions, you’re going to know well ahead of time what your chances are of overdrafting,” says Wilk.

And if an overdraft is looming, you can take preventive measures: You can pause your Netflix subscription, eat ramen for a week or transfer some money from your emergency fund.

Dave Also Offers Interest-Free Paycheck Advances

Or, if you’re out of options, you can ask Dave for an interest-free advance on your next paycheck.

You can request any amount up to $75. Then, when your next paycheck hits, Dave will withdraw the amount you borrowed — without any interest charges or fees.

The $75 limit is purposeful, according to Wilk. It’s enough to cover the essentials, but not so much that it could lead to irresponsible behavior or unnecessary reliance.

“There’s no place in the country you can go and borrow that little amount of money,” says Wilk. “Payday products allow you to access a large amount of money, but that can get people into a tough cycle of always relying on it.”

Not to mention, payday loans can have an interest rate of nearly 400%, whereas Dave’s advances don’t have any.

Though Dave doesn’t check your credit, you’re eligible for an advance only if you have some form of recurring income.

If you deposit money sporadically, the app won’t be able to discern when your next paycheck is due to arrive — and therefore won’t be able to offer you an advance.

“When we can’t find anything that’s reliable, the app gets harder to use.” says Wilk. “It’s very much geared toward people who have an idea of when they’re going to get paid — and that’s a big part of what gets you approved for the $75 advance.”

Tip Dave, Plant a Tree

Dave’s advances, as noted, are free — but if you’re grateful for the services, you can “tip” the company. For each percentage you give, Dave will plant a tree in Africa, according to its website.

For example, let’s say you borrowed $50. Tipping $5 would equate to 10%, so Dave would plant 10 trees.

Overall, Wilk says, he and his co-founders simply want Dave to be like your friend (your friend who looks like a bear and plants trees).

“Friends let you borrow around that $50 to $75 amount, don’t charge you interest and warn you about bad things that are going to happen to you,” he says.

For that “friendship,” Dave charges $1 per month with no contract.

If you mostly use credit — or rarely overdraft — that’s probably not worth it. But if you’re a chronic overdrafter who pays up to $450 in fees each year, it very well may be.

Susan Shain is a freelance writer and digital nomad. She covers travel, food and personal finance (basically, how to save money so you can travel more and eat more). Visit her blog at susanshain.com, or say hi on Twitter @susan_shain.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Dow Jones vs. S&P 500 vs. Nasdaq: A Guide for Future Warren Buffetts

If you’re the kind of person who likes to watch the news, you’re probably more interested in the happenings of the world than the jarbled letters and numbers that tick across your screen.

 

But you’re probably vaguely familiar with them: DJIA, S&P, Nasdaq: You’ve seen them your entire life, but maybe they’ve never served a purpose to you, so you ignore them and continue watching the nightly news.

Then, when the media reports on the stock market, good or bad, you freak out or rejoice accordingly.

The truth is, you can save yourself a lot of stress and anxiety by actually knowing what those terms mean.

You can stop wondering if your media outlet of choice is sensationalizing the story for click-throughs and ratings and know for yourself how the market is doing.

And you can start by knowing about the major stock indexes.

What Is a Stock Index?

A stock index measures a particular group of companies in the stock market. It’s the average price of the stocks for companies in the index. The media reports on the percentage the index’s stocks collectively rise or fall during the trading day.

An index can measure the biggest companies, smaller companies, most frequently traded, companies headquartered in the U.S., or even the whole dang market.

There are almost 100 indexes used to measure the health of the U.S. stock market, and even more to measure markets around the world.

But you don’t need to know them all; just start with these three.

The Dow Jones Industrial Average (DJIA)

The Dow is the price-weighted average of stocks of 30 of the largest companies in the U.S. These companies aren’t necessarily the 30 highest-priced stocks, but they are among the most well-established and influential companies in the market.

So when news anchors say “the market is up today,” they’re usually referring to the Dow Jones average.

The Dow is one of the oldest and best-known indexes in the world. You may have recently heard that General Electric got booted from the Dow after 111 years in the index. GE was an original member of the Dow in 1896 and remained in the index continuously since 1907.

But two names you won’t see in the Dow are Amazon and Google (or rather, Alphabet, Google’s parent company). The S&P Dow Jones Committee says adding stocks with four-digit share prices would distort the index.

And much like the honey badger, Amazon and Google don’t care. They love their high stock prices, and they’d have to create more shares of stock — called stock splitting, which companies often do to make their stock prices look more affordable — to enter the Dow.

Why is it important? The media may rely on the Dow to gauge the market but with tech companies like Amazon and Google refusing to conform to take a seat at the Dow table, many suggest finding a more diverse index to base your opinions on.

S&P 500

Standard & Poor’s 500 — aka the S&P 500 or just “the S&P” if you’re cool — is the index of the largest 500 companies traded in the market. Those companies are picked by the same people who decide what companies are in the Dow.

This is the index used by financial professionals to gauge the health of the market. It’s updated every 15 seconds during trading hours, so it gives clear, up-to-the-minute trends in the economy.

Like right now, over a quarter of the stock in the index are from technology companies.  

The financial sector and health care are second and third, respectively, which is a sobering thought when you think about how your credit card interest and health insurance premiums are helping them get there.

Why is it important? The S&P 500 and the Dow often move in the same direction but the S&P has a more inclusive gauge on the pulse of the market. Keep its six-decade history in mind to help you make personal spending, investing and voting decisions.

P.S. Super investor Warren Buffett bet that a simple S&P 500 index fund could beat the performance of a professionally managed hedge fund over 10 years. That bet won him — and Girls Inc. — $2.2 million.

Nasdaq Composite

The Nasdaq Composite includes all of the stocks traded on the Nasdaq Stock Exchange, which is confusing because both the exchange and the index can be referred to as just “the Nasdaq.”

Fun fact: Nasdaq is actually an acronym for the National Association of Securities Dealers Automated Quotations.

The more you know.

The Nasdaq is one of the largest stock exchanges in the world, second only to the New York Stock Exchange (NYSE). The companies that make up the S&P 500 and Dow Jones are traded on both the NYSE and Nasdaq.

There are several differences between the Nasdaq and NYSE which make the composite an index to follow, with the primary one being that Nasdaq is the home of the technology market. Half of the exchange is made up of tech companies, including Apple, Google, Amazon and Microsoft.

Why is it important? The NYSE is your grandmother’s stock market, less volatile and more reliable. The Nasdaq trades tech companies that are growing, innovative and slightly unpredictable. If you want more technology companies in your portfolio, now you know where to find them.

This article contains general information and explains options you may have, but it is not intended to be investment advice or a personal recommendation. We can’t personalize articles for our readers, so your situation may vary from the one discussed here. Please seek a licensed professional for tax advice, legal advice, financial planning advice or investment advice.

 

Jen Smith is a staff writer at The Penny Hoarder. She gives money saving and debt payoff tips on Instagram at @savingwithspunk.

 

 

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Online Shoppers Will Soon Have to Pay Sales Taxes — Here’s Why

Online shoppers across the country could be seeing higher prices at their favorite internet retailers in the next few months, thanks to the Supreme Court.

In a 5-4 decision, Supreme Court justices said online retailers would be required to pay state and local sales taxes.

Before now, retailers that sold their goods on the internet and shipped them nationwide didn’t have to charge you a sales tax unless they had a storefront in the state where the purchase was made. Now, big retailers that make more than $100,000 in annual sales, or make at least 200 transactions in a state, will be required to pay a sales tax.

That means while the price of the new TV or bike or laptop you were eyeing online might not change, you could end up paying the same price you would in stores once the sales tax is added.

In most cases, the sales taxes only add up to a few extra dollars for you, but for state and local governments, that can mean millions in extra tax revenue — and nationally, it’s billions of dollars.

When Can You Expect to Start Paying More?

The change won’t come overnight, but it won’t take much longer than that. According to The New York Times, some states think they will be ready to start collecting the sales taxes within the next 30 to 90 days.

The states where it will happen quickly are those that already have laws governing how the taxes will be collected on the books. Other states will first have to pass laws, and some may face additional court battles before companies start to charge you sales taxes.

In the end, the amount of time it takes before you start to see the online price hikes will depend on where you live. But whether it comes sooner or later, it’s coming eventually. So get ready.

Desiree Stennett (@desi_stennett) is a senior writer at The Penny Hoarder. She writes about how government and court actions impact your wallet.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.