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Comment by chetanahuja | Hacker News Reader

So this is basically a payday loan scheme with venture backing? At any rate, for the kinds of jobs this seems to be designed for, $3 a week (~ $156 a year) sounds like a very high amount of fixed interest to be paid.

EDIT: Regarding the argument in this subthread regarding interest rates, the common mistaken assumption seems to be around what constitutes the "principal" here.

In "steady state", there will be very little money flowing out of Even's coffers into the user's wallet. So the "average" amount loaned to the user is likely to be close to zero... or even negative (in case the user makes a bigger paycheck than usual). So the interest calculations only make sense on that amount. Not the entire amount of money that the user made. The actual "interest" payment in those cases could easily be in 100% + range or more for the average user.

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Cash forwards are interest free, so much less predatory.

What they seem to be doing though is taking all the "excess income" and "saving" it to their accounts, which they'll give you a portion of the interest they earn on.

They've obviously worked out the math that after a certain level, "topping up" your account can even be done within the interest earned.

From their TOS[1]:

> One last important note: The Even Cushion is not an investment account, and it does not earn interest.

[1] https://even.me/terms

Min. wage in California is $9. At 40 hours/week, that's $360. $3/week is less than 1% of that. Payday loans use much higher interest from what I understand.

(I ignored taxes/withholdings to make the math easier).

"$3/week is less than 1% of that"

That's 1% for one week !! In comparison, current CD yields are close to 0% per annum

I don't feel that most of the people this service is targeting even knows what a CD is, but I'm pretty sure a lot of them are familiar with payday loans. Unless I'm missing something this service definitely seems a lot less evil than a payday loan.

That's less than 1% over one week. The APR would closer to 15-20% (depending on salary, pay frequency, etc.).

Yes, but ed's statement still stands. Payday loan APRs often reach into the hundreds of percentage points.

https://www.scc.virginia.gov/bfi/files/pay_guide.pdf

http://www.in.gov/dfi/2366.htm

I've answered with an EDIT in my GP comment to keep it in one place.

I'm inclined to believe you, but how would you something something close to 15-20%?

For 1 week: 3 / 360 = 0.8%

For 52 weeks: (3 * 52) / (360 / 52) = 0.8%

Or is it that Even is holding on to effectively a weeks worth of pay at all times, and we're calculating interest based on $360 of principal? Or is compounding coming into play somewhere?

See EDIT: on the GP comment.

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