<br>Waiting for payday can be difficult, especially if an unexpected expense arises before your check. Earned wage access is a benefit some employers offer that allows employees to draw money from their paycheck before payday.
While the ability to access money as you earn it can be a helpful company benefit, it could also make budgeting more difficult in the long term — and you may wind up paying fees to access your earnings.
Here’s what to know about earned wage access, and what to consider before using it.
What is earned wage access?
Earned wage access, or EWA, is a company benefit that allows employees to receive some of the wages they’ve already earned before payday. Also called on-demand pay, it's frequently an option for hourly workers. Companies like Walmart, Amazon and McDonald’s offer EWA as part of their benefits.
The service is often free if you can wait a day or two to receive your money. If you need instant access to your funds, you’ll typically pay a fee of a few dollars.
The amount you receive early is deducted from your upcoming paycheck.
How does earned wage access work?
- Download the app and link a bank account. Download the EWA app that partners with your employer. The app will require you to link a bank account or debit card where it can deposit the money. The service is usually tied to your employer’s payroll system and may show how much of your paycheck you’ve earned at the end of each payday.
- Request part of your paycheck. Apps typically limit the amount you can request each day or pay period. Half of your earned wages is a common limit. Your employer may set its own restrictions, too.
- Determine how you want to receive your advance. You’ll typically link a bank account to receive your funds, but some EWA providers offer a debit or prepaid card.
- Agree to the terms, including potential fees. When you request an advance, the app will tell you how much you can receive and when, and disclose any transfer fees. If you agree, the funds are usually deposited into your account within one to three days. Fees may be subtracted from the advance before you get it or withdrawn with repayment.
- Get the rest of your paycheck on payday. On your next payday, any amount you received in advance will be deducted from your paycheck.
Earned wage access example
Say you earn $1,000 every two weeks, and Friday is payday. You learn on the Monday before payday that you have to make an unexpected car repair, but you don't have enough savings to cover it. If you’ve earned enough of your paycheck, you can request some of it on Monday to get the car fixed before Friday.
If the app charges an expedited funding fee, it may be taken out of the amount you request, so be sure the advance covers your expense.
How to qualify for an earned wage access service
Earned wage access apps don’t do hard or soft credit checks. Instead, they use payroll information and limits set by your employer to decide how much you can access early.
To use an earned wage access service, you usually need to:
- Work for a company that offers earned wage access as a benefit.
- Download the EWA app that your employer works with.
- Link a bank account or debit card where the funds can be sent.
- Set up direct deposit, in some cases, to either qualify or lower transfer fees.
Popular earned wage access companies
Payactiv, DailyPay and One@Work (formerly Even) are three popular earned wage access companies.
- Payactiv lets employees access up to 50% of their daily net earnings at any time. Transfers usually take one to three business days, but employees can transfer funds immediately for no fee or a fee of $2.49 or $3.49, depending on how you receive the funds and whether you have direct deposit set up.
- DailyPay decides how much of your earnings you can have deposited when you make a request. Users can get their funds instantly for a fee of $3.49 or on the next business day for free.
- One@Work lets employers determine how much of your paycheck you can get as an advance but says most allow up to 50% of net earnings. Users can receive funds instantly for a fee or by sending the funds to a OnePay spend account. Otherwise, transfers can take up to one business day, according to the company.
Summary of earned wage access apps
| EWA app | Deposit amount | Fees | Time to fund |
|---|---|---|---|
| Payactiv | Up to 50% of your daily net earnings. | Disbursement fee: $0 to $3.49. | One to three business days. |
| DailyPay | Up to 100% of your net earned income, with a daily maximum of five transfers or $1,000. | Fast-funding fee: $3.49 for same-day transfers. | One business day. |
| One@Work | Varies by employer, typically up to 50% of your next paycheck. | Fast-funding fee: Amount disclosed when an advance is requested. | One business day. |
Earned wage access pros and cons
As with any loan, it’s smart to weigh the pros and cons of using an earned wage access app.
Pros
- Fast access to cash. You can usually access part of your paycheck within days after you request it — or instantly, in some cases — making this an option for emergency expenses.
- Low or no fees. If you can wait a day or two for the funds, this is a no-fee option. If you choose an instant transfer, fees are a couple of dollars, which is still much lower than fees on payday loans and many other short-term borrowing options. Also, you won’t pay interest on EWA advances.
- No credit or income requirements. While other borrowing options like credit cards and personal loans require a credit check and application, EWA services don’t check credit or have strict income requirements.
Cons
- Smaller paycheck. Taking earnings early means a smaller paycheck on payday. If you have bills set to autopay, your paycheck could come up too short to pay them.
- Possible overdraft fees. Though it’s unlikely that an employer-sponsored EWA service will directly cause an overdraft fee, if your smaller biweekly paycheck isn’t enough to cover other regular expenses, you may unintentionally overdraw your bank account.
- Risk of repeat borrowing. EWA is a helpful option in an emergency, but consumer advocates say regularly taking money from your paycheck before payday could become an unsustainable habit. Research from the Consumer Financial Protection Bureau found that the average worker using EWA services took 27 advances over a year.
» MORE: The best ways to borrow money
Earned wage access vs. cash advance apps
Earned wage access companies and cash advance apps like Dave and Brigit have some crossover. Both provide paycheck advances, but loan amounts and fees can be different.
If you’re choosing between EWA and a cash advance app, consider these similarities and differences.
Similarities
No credit check: Neither EWA nor cash advance apps do any kind of credit pull — soft or hard.
Small borrowing amounts: EWA companies let employees borrow a portion of their regular paycheck early. Some have daily borrowing amount caps; the exact advance amount can vary by employer. Cash advance apps may cap advances around $250, though many reach $500 or higher.
Fast funding: Both EWA and cash advance apps provide money quickly — usually within a couple of days — though users can often get funds faster for a fee.
Differences
Employer involvement: Your employer must partner with an EWA app to provide the benefit. Cash advance apps are downloaded directly from the app store without your employer’s involvement.
Cash access requirements: EWA is tied to your paycheck, which helps the app decide how much you can withdraw. Your employer may also have settings in the app that restrict the amount employees can take. With a cash advance app, the amount you can borrow depends on your linked bank account’s cash flow.
Fees: An EWA app will probably have fewer fees than a cash advance app. EWA apps may charge transfer or fast-funding fees. Cash advance apps, on the other hand, almost always charge a fast-funding fee, ask for optional tips and some require a monthly subscription fee.
