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Cost of Waiting for Pay

An astounding ‘over $100 billion are earned by the end of every week’, but remains unpaid. When you add to it the additional lag of one week in payroll cut-offs, the number is easily over $200 Billion. This money is stuck in the system waiting to get disbursed while millions of workers are juggling expenses, paying penalties like late fees, overdraft fees, and loan fees and interest while waiting for payday.

Waiting two weeks to get paid may not seem very difficult if you have savings, insurance protections, assets or investments that you can use in case of emergencies. But, for 90 million Americans living paycheck to paycheck, this wait for payday is expensive.

The financially underserved segment is the hardest hit because people making low wages often don’t have enough savings. When they are faced with an urgent need for cash their options are very limited – if they can’t borrow from a friend or family then they either pay overdraft fees to banks, or late fees to buy time till they receive the next paycheck; or they turn to predatory alternative financial services like payday lenders, title loans, or installment loans all of which have high fees and around 400% APR if the balance is not paid off in 2 weeks.


Fee traps and debt traps - The numbers are shocking

  • $120 billion is paid per year in overdraft fees and credit card interest (financial services)
  • $138 billion is paid per year in payday loan, title loan, and installment loan fees and interest (alternate financial services)


Overdrafts and late fees are being used to buy time until the next paycheck

Every day as the clock ticks and life happens, new expenses get incurred and new headaches accumulate. A tiny financial shock like an unexpected school expense quickly becomes an overdraft or late fee buying more time until the next paycheck.


Prime and sub-prime loan options are costly

Because payroll and earnings follow a fixed schedule like biweekly paychecks, any unplanned expense or large payment between paychecks pushes people to use credit and loans to bridge the timing gap between income and expenses.


Traditional financial services have failed

Sadly, none of the mainstream financial products are designed to reduce the cost of financial shocks striking the low wage workers, instead they do the opposite, push ordinary people living in financial stress further towards fee traps and debt traps that capitalize on consumer failure.


The real cost of a paycheck for workers

With an estimated 90 million people having less than $400 in savings, the primary means of liquidity to meet daily living expenses is their paycheck, which they get every couple of weeks. Ironically, not only do workers give their labor to employers without getting paid for 2 weeks, they also endure the stress of penalties like late fees and overdraft fees while waiting for their paycheck.

This wait for paychecks can have a direct cost as high as $100 from loan fees, late fees and bank overdrafts fees.

At PayActiv, we modeled the cost of ‘waiting for pay’ and the situation is not just bad, it is dire. $38 billion was paid in overdrafts and payday lending fees in 2014.

Just by eliminating these costly ‘waiting for pay’ penalties we can return Billions of dollars back to the workers.

PayActiv's game-changing technology enables employers to provide their employees with a path towards financial self-reliance. A debt free alternative to payday loans that is available to employees regardless of their banking or credit status.


We are FinTech for Ordinary People.

alternative to overdraft and late fees cost of waiting for pay

Access is more than a paycheck.
It's peace of mind.

Access is more than a paycheck. It's peace of mind.

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