Just over half of U.S. adults are living paycheck to paycheck, at best. That means the margin between keeping it together and falling apart is only a few days wide, at most.
So many of us stand to lose everything we've built financially due to a late check, a lost shift or an emergency expense. Without an emergency fund, the only other option is to figure out how to get paid early.
A concept called earned-wage access can offer one last line of defense for those without emergency savings. And we like how favorably it compares to alternatives to getting your paycheck early, such as costly payday lenders.
DailyPay: It's Your Own Money
It'd make a great question for Family Feud if you surveyed HR departments about why they make you wait a week, two weeks, a month or more for your paycheck. The reasons are many, but they often don't add up for employees.
A company called DailyPay thinks it shouldn't take so long to pay employees what they've already earned. They work with employers to give employees the option to get paid faster, using a benefit known as earned-wage access.
With DailyPay, you don't even have to wait until you've completed a pay period to get your money into your bank account. After each shift, your earnings will be added to your available balance in your DailyPay account. You can draw from your available funds when you need to do so.
Staring down an unforeseen emergency? You can get your funds via direct deposit as soon as the next day, for free, or you can pay the equivalent of an ATM charge for an even faster turnaround.
It's a life-changing concept. About 97% DailyPay users find that they no longer need to turn to payday lenders after taking advantage of earned wage access.
DailyPay is a financial technology company, not a bank. And the money you access is not a loan â€" it's your own money.
The Good:
This isn't a loan. With DailyPay, you access money you've already earned. And there are no monthly service fees or hidden costs. If you need your money as soon as possible, you can opt to pay a small fee that's about the size of a typical ATM charge.
The Bad:
As with the other options for getting your paycheck early on this list, your next check will be smaller any time you take from it early. Your paycheck on payday will be reduced by any amount that you have drawn prior.
Comparison of Early Pay Options
Getting your paycheck early can help you triage your finances to keep late fees, overdrafts, interest charges and legal action from bleeding your budget dry. It can also help you pay bills and address unforeseen circumstances.
However, how you get paid early matters a lot.
Payday Loans
Most people tend to have a negative perception of payday loans, but that doesn't stop millions of Americans from borrowing money from them every year. That's because payday loans are one of the easiest ways to get cash in a hurry.
Got a job? Got an address? Can you prove when your next payday is? Great; you qualify for a loan from most payday lenders.
However, these lenders set the bar for loans so low because the returns for them are so high. Many states have sought to put a ceiling on the interest rates of payday loans, yet you'll still find repayment terms charging as much as 200% in interest â€" or even as much as 400%.
One false step, and your next few paychecks could be gobbled up by late fees and ballooning payments.
The Good:
It doesn't take much to qualify for a payday loan. You just need to be gainfully employed and usually a bank account to receive a direct deposit.
The Bad:
The interest rates you pay in some states are criminal in others. No matter which state you're in, the interest rates for payday loans are usually much higher than every other type of loan.
Short repayment terms are common, making these loans difficult to pay back.
Cash-Advance Apps
Apps make things more accessible and convenient. But whether initiated through an app, a website or a brick and mortar location, a cash advance is still a cash advance.
However, payday lending companies have improved their lending practices in response to the poor reputation they've earned and the state-level legislation that has been enacted to rein in some of their more predatory practices.
Popular cash advance apps tend to have more reasonable terms than conventional payday loans, but their formula still makes it difficult for people living check to check to rebound from an unexpected expense.
With DailyPay, for example, the money you take comes from your next paycheck. With cash advances apps, they debit your account when payment is due â€" and this is where people tend to stumble.
If your money's a little short when payment is due, you face overdraft fees and potentially steep penalties if your bank rejects the debit due to insufficient funds.
The Good:Â
Cash advance apps are much more convenient than conventional brick-and-mortar payday lenders. And you can access your loan within a day or two.
The Bad:
There's a much higher risk of having to make a payment before your finances have recovered, which could leave you in worse shape or in need of another cash advance. There may also be monthly service fees attached to using the service.
Credit Cards
While maybe not the dictionary definition of earned-wage access, credit cards essentially let you borrow from your future earnings, too. But unlike the other options for getting paid early, you don't have to repay what you borrow over a short period of time.
Far fewer people would use payday loans if they had access to a good credit card. However, the credit score requirements can rule out this option for many people.
And for those who qualify for a basic credit card, the credit line extended to them may not be enough to bail them out of whatever financial emergency they're facing.
The Good
While you should always try to pay down your credit cards quickly, you have the ability to spread out a major credit card purchase by only paying the monthly minimum while your finances recover.
The Bad
You need a credit score that's at least in the fair range to qualify for a credit line big enough to bail you out of tight spots. Millions of people turn to cash advance lenders because this isn't an option for them.
And if you need cash, the cash advance fees and interest rates for credit cards can act as a heavy tax for doing so.
A Checking Account with Early Direct Deposits
Banking services may offer certain checking accounts that allow you to get your direct deposit two days earlier. Early direct deposit is a perk that can help you avoid overdraft fees when your bills and your paycheck are misaligned by a day or two.
If you're on a tight budget, having your check hit your checking account two days early may not be an impactful enough solution to help you overcome moderate or major expenses you weren't expecting.
The Good:
Early direct deposit through a checking or savings account is an ace up your sleeve that could help you avoid overdrawing your checking account in certain situations.
The Bad:Â
Getting early direct deposits is useless to you if you need to get your hands on money three or more days before your scheduled pay date.
Final Word
It's nearly impossible to save money and improve your financial situation if you have to borrow against an upcoming paycheck.
When considering all of the options for getting paid early, DailyPay seems to offer the most consumer-friendly borrowing options. It can get you money just as fast as any of the other options, while eliminating the possibility of late fees and overdrawing your checking account.
Check with your human resources department to find out if your company offers DailyPay or to request it if it isn't currently available.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
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