Like many in California, you may get paid twice a month or on two-week cycles. When your check arrives, your first concern may be to pay your rent or mortgage and tackle as many of your bills and loans as you can, leaving a few dollars to carry you through. As time draws closer to payday, your funds may become very low. You cannot even pay your bills, so forget about eating out or seeing a movie with your family.
You may have heard about the latest apps that allow you to access the money you have already earned even if it is not yet payday. These early wage apps are becoming more popular, but can they really be the answer to your money shortage?
Is it really better to get your wages early?
Much like a payday loan, early wage apps anticipate your upcoming paycheck and provide you with the money you need to get you to that point. While payday loans admit to being loans, early wage apps avoid using this term. They tell you the money is already yours, and some even suggest you pay for their services with a "tip." However, some important facts to know about this new technology include the following:
- Apps that suggest a tip often recommend an amount that is nearly a 500% interest rate.
- Customers who do not tip often find their loan limits drop very low.
- Some plans limit the number of times you can freely tap into your wages per year and charge a fee for any advances after that.
- Other apps charge a transfer fee for moving the money to your account.
- Some apps require your employer to authorize payday advances before you can apply for one.
- On your payday, the app deducts the loan amount from your checking account in the same manner a payday loan works.
Apps that sync with the general schedule of your pay periods do not always accurately guess the day your check will deposit in your account and may create an overdraft if you do not have enough money in the account. This is only one risk of the early wage loan. More critically, taking early deductions from your paycheck can lead to a rapid spiral when your smaller check covers even fewer of your bills and debts the following week.
More effective than relying on a cycle of payday loans and early wage withdrawals is to deal with your debt issues head-on. Reaching out to a compassionate attorney can open up alternatives you may not have considered. You may find you have far more peace of mind than you do juggling short-term fixes.