Statewide App Expansion Aims To Help Texans Avoid Overdraft Fees

AUSTIN, TEXAS — Some 90 million U.S. residents living paycheck to paycheck unwillingly give banks a lucrative stream of revenue in the form of billions of dollars in overdraft fees as the working class struggles to pay their bills.

Brigit — a tech startup that helps cash-strapped Americans bridge the gap between paychecks —aims to change all that. Recently expanding into Texas, the app links to a person's bank account, applies proprietary predictive technology to anticipate a person's financial shortfall and instantly deposits up to $250 in cash with no interest.

What this does is enable consumers avoid average overdraft fees of $34 for each bounced check or exceeded transaction, often totaling in the hundreds of dollars monthly and potentially thousands of dollars in bank fees a year. The financial cushion Brigit provides not only helps consumers avoid overdraft fees, but prevents consumers from approaching predatory lenders charging exorbitant interest rates for small loans to cover their bills.

And all for a roughly the price of a NetFlix subscription, at $9.99 per month.

The app's recent expansion into Texas represents the fifth state where the service is now operational after its August launch in California before coverage in Illinois, Ohio and Arizona. So far, the app has originated more than $10 million in interest-free cash infusions to help everyday Americans avoid fees and interest payments, Brigit officials told Patch in a recent interview.

The app automatically deposits money into customers' bank accounts when their bank balances get dangerously low and likely to accumulate overdraft fees as a result. The loan is is paid off by deducting it from the customer's next paycheck direct deposit.

Given financial institutions' penchant to charge overdraft fees, the app provides a safety net to consumers at a time when big banks are collecting more fees than ever. According to The New York Post, punitive charges for negative bank balances last year reached their highest level since 2009 — the end of the Great Recession marked by legions in financial strife — when consumers paid $34.3 billion in overdraft fees.

"You create an account, link the account to Brigit and the entire process takes 90 seconds," co-founder and CEO Zuben Mathews told Patch during a recent telephone interview. "It's tailored to your needs."

Sensing this was too good to be true, Patch thoroughly vetted the app. It's easy to download, and text alerts are sent to users either informing them they're about to go into the red or their bank balance is in good shape without the need for another successive loan. While not everyone is eligible for the app — users must make more than $800 monthly with banks accounts at least three months old with demonstrated monthly income deposit activity — those qualifying find the service filling the gap between paychecks whenever financial challenges are encountered.

And such struggles often are often the reality for many. According to the Consumer Financial Protection Bureau, the median transaction amount of purchases generating an overdraft fee is a mere $24. Stated another way, roughly half of all the transactions that resulted in overdraft fees amounted to $24 or less — a small amount, to be sure, but in the aggregate a multi-billion-dollar cottage industry for banks in terms in the form of the overdraft fees such transactions generate.

"Having access to this interest-free, real time cash is game changing to a lot of them," Mathews said of the app's users. "At first, it sounds too good to be true until they try the service from the app store free of charge."

For Mathews, the business model was born of personal financial hardship during his college years, when he found himself sometimes rationing candy bars having no money left for groceries. Given an altruistic motivation to avoid having others experience such financial struggle, the co-founder said the company operates in a socially responsible manner with a negligible default rate among its users.

Moreover, the company doesn't check users' credit scores since it's that segment of the population — with bad credit or no credit history at all — that is most vulnerable to predatory lenders, banks' overzealous charging of overdraft fees and, in some cases, financial institution's added punitive charge of $15 or so on accounts staying in the red for a certain period of time they euphemistically call an "incentive" for the customer to bring it back into the black.

"We're really trying to solve that issue," Mathews told Patch of consumers' financial struggles sparked by overdraft fees. "Once you activate that safety net, you can be assured you'll never overdraft again."

Cost to download the Brigit app: $0. Monthly fee for the safety net: $9.99. Peace of mind in knowing you'll likely never pay overdraft fees again: Priceless.

To download the app, click here.

Get Patch's Daily Newsletters and Real Time Alerts

>>> Images provided by Brigit