While we all enjoy the holidays leading up to the new year, they can put a strain on our finances. Many people who don’t have cash on hand will turn to credit cards, short-term installment loans, or even payday loans to fund these expenses.
Now that the holiday season is over, many may end up with a “debt hangover.” Worse still, every week or month that they fail to pay off these debts in full, they’ll accrue more interest on the outstanding balance. Credit card companies demand monthly payments that typically have very high-interest rates attached to them – some even have interest rates up to 29.99% APR. Likewise, lenders of small-dollar amounts usually charge very high fees and interest rates to borrowers.
Of course, these personal loans can lead to bad debt. What you may not know is that they also have the potential to harm your credit score. Some payday lenders will even deduct what’s owed to them from your bank account, leaving you unable to pay for necessities such as food, transport, and childcare.
The good news is that there’s a better option – on-demand payment.
In this article, we’ll explore more about on-demand pay, how to access it, and why it’s the smart choice for getting the cash you need for immediate spending.
On-demand payment is exactly what it sounds like: a means for people to access wages that they’ve accrued but not yet received instead of having to wait for their next weekly or monthly payday.
It’s also known as Earned Wage Access (EWA), and it’s becoming an increasingly common element of employee benefit packages.
EWA allows you to quickly access the money you’ve already earned before payday. It can happen in several ways; the funds can be loaded onto a debit or prepaid card, transferred to your bank account, or even picked up as cash at Walmart. Alternatively, Payactiv allows you to use your earned wages to even pay for services like Uber and Amazon, and pay your bills, directly in the app.
The best on-demand pay service providers give you choices with how you want to access your money and always provide a free option. Look for the instant deposit feature so that you can access your earned wages real-time in case of emergencies. Some providers also include additional perks like discounts and special offers and handy features like budgeting and savings tools and free bill management.
The option of accessing pay you’ve already earned but not yet collected helps in several ways. First, as we discussed earlier, it avoids with maxing out credit cards or turning to expensive short-term loans.
But it also helps you feel less stressed, especially if you are in the lower wage bracket working paycheck to paycheck. Aside from holiday spending, you could be exposed to situations where unplanned but significant expenses for issues like childcare or healthcare can put family finances under pressure.
Solving these problems and trying to borrow money at short notice is time-consuming and often embarrassing.
According to PwC’s 10th annual Employee Financial Wellness Survey (PwC US, 2021), 63% of employees say that their financial stress has increased since the start of the pandemic.
And it’s an issue affecting the full generational spectrum, with 72% of Millennials, 68% of Gen Z, 62% of Gen X, and 46% of Boomers currently reporting financial stress.
When financial stress is reduced, employees are more motivated and focused on their work. If employees are worried about their debts or how they’ll feed their family while they wait for payday, it’s hard for them to be fully present at work and contribute with all they have to offer.
Employers who offer EWA found that 89% stay longer and 79% would even switch to an employer who offers it. EWA is an employee benefit that is available to employers at no cost, yet it gives them infinite ROI by helping recruit, retain and engage their workforce.
If your employer is concerned about the employees getting into debt this holiday season, they should consider offering Earned Wage Access (EWA) as part of their benefits package, such as that offered by Payactiv.
Every day, Payactiv helps ordinary employed people who find themselves in a tight spot and in need of cash at short notice – while eliminating the need for them to borrow from lenders or rack up excessive credit card debt. What’s more, we help provide financial wellness to everyone by putting them on a path to self-reliance when budgeting and managing their expenses.
Our service is low-cost to employees and zero-cost to employers. Our unique operating model means that our service doesn’t involve lending money to people – we simply provide access to a portion of their cash as they earn it by partnering with their employer.
*The Payactiv Visa Prepaid Card is issued by Central Bank of Kansas City, Member FDIC, pursuant to a license from Visa U.S.A. Inc. Certain fees, terms, and conditions are associated with the approval, maintenance, and use of the Card. You should consult your Cardholder Agreement and the Fee Schedule at payactiv.com/card411. If you have questions regarding the Card or such fees, terms, and conditions, you can contact us toll-free at 877-747-5862, 24 hours a day, 7 days a week.
1 Many (but not all) employers, government benefits providers, and other originators send direct deposits early with an effective of 1-2 days later. Beginning with your second direct deposit of at least $5 from the same source, Central Bank of Kansas City (CBKC) will post the funds to your Payactiv Visa Card when we receive it, rather than on the effective date. This may result in your having access to the funds sooner. The date CBKC receives your direct deposit and the effective date are controlled by the originator.