How the Dave Budgeting App Works

Los Angeles-based Dave.com was built on the premise that financial products should be easy and approachable, and that bank overdraft fees are the worst thing that was ever invented. Now Dave has launched its own bank, and they won’t charge overdraft fees. And you can use the app to get a quick advance on your paycheck, avoiding the deep gouges inflicted by payday lenders.

Dave’s first iteration, launched in 2017, was as a mobile app that helped users avoid overdraft fees by looking over past banking activity to predict future cash flows. Users link bank accounts, let Dave know when to expect payday deposits, and tag rent and other regular payments. Just because your bank balance says $750 today doesn’t mean you have $750 to spend tomorrow. Your rent might be due today, so when you put that cup of coffee on your debit card in the morning, you’ll find that it cost you upwards of $30, once your bank has whacked your account for an overdraft fee. Paying a huge fee for a $5 cup of coffee is not an effective financial management technique.

So the app was set up to alert its users about problems that might arise before the next paycheck is deposited. Jason Wilk, co-founder and CEO, says, “We wanted to build a product that was your financial friend. We felt banks were kicking people when they were down.” Wilk also says that the name Dave, besides being a friendly sound, represents David in his battle against Goliath in the Old Testament. “We help our clients take on big banks and huge fees,” Wilk states.

Dave Bypasses Goliath

In 2019, Dave launched its own bank, so its users can avoid Goliath entirely. Customers that have their paychecks directly deposited to Dave’s bank, or the bank attached to their Dave app account, will be alerted when the cash flow projections indicate the balance might drop below zero, and opt for a $100 advance to bridge the gap. The loan is automatically repaid on the user’s next payday.

Banking clients also get a debit card, and the option to have Dave report regular on-time real estate rent payments to the various credit bureaus to help lift their credit scores. Credit bureaus recently started accepting rent payments as a way to raise scores, so they’re filing those reports for customers who opt into the service, for free. Rent payment history reporting requires that client directly deposit their paychecks.

There are services that report your rent to credit bureaus for you, but they're not free. Either you or your landlord (or both) will have to pay for the privilege.

You can also use the app to find side gigs through partnerships Dave has established to find local short-term jobs. Partners include Airbnb, Instacart, DoorDash, and Rover.

What Does Dave Cost?

Using the app costs $1 per month, which is deducted from your bank account when your first monthly paycheck hits. You can earn free credits towards your Dave subscription fee by making debit card purchases from partnering retailers; they are detailed in the app. This feature works best when location services are turned on.

If you get an advance, the cost is up to you. Borrowers choose how much they want to tip Dave after getting the advance. As Wilk says, “You’re avoiding what might be a $38 fee. What is this advance worth to you?” Besides funding Dave’s ability to provide advances in the future, Dave plants a tree in Africa based on the percentage of tips received.

Sound too good to be true? There are a few small problems that could spoil your fun. Dave can only connect to bank accounts with sole owners, and only one mobile device is allowed per Dave account. It’s an app-only service; you can’t check on your account on the web. If you regularly deplete your checking account within a couple of days after you get paid, you won’t be eligible for advances. Dave looks for a bit of a cushion before making you a candidate for an advance. Also, it can take up to 3 days for an advance to show up in your checking account; you can pay a fee to get the advance in just 8 hours. If you don’t pay your advance back on the due date, you’re ineligible for future advances. And users who connect the same Dave account to multiple devices are dropped from the service. So play by the rules, and be as friendly to Dave as Dave is to you.

There are prescribed steps to follow should you want to cancel your Dave app subscription that are trickier than merely deleting the app from your device, so be sure to follow them if you want to unfriend Dave.