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Pay a Lot to Get Your Own Money
You earn the wages, then pay a premium to access them
Access to affordable credit can be a helpful, even necessary tool when unexpected expenses pop up.
A payday loan is easy — but terrible. High interest rates, aggressive collections, just an all around unpleasant experience.
There are apps like Dave — but I’ve written about why getting a loan from a cartoon bear can be a really bad idea:
There’s also a relatively new product — earned wage access.
This seems pretty straightforward — you get an advance on your earned wages. The app works with your employer to determine your expected pay for the next pay date, and you just get a portion (up to 40%) early.
Your paycheck is then reduced by the amount of the advance, less any fee.
It’s your money and it’s been earned, so these apps allow you to access it to manage your cash flow.
Of course, if I’m writing about it, you know there are probably some problems.
Actually, I’m writing about earned wage access now because an article I wrote about it back in 2021 was my most-viewed article on Medium last week.
People seem to be looking for cash flow solutions.
Here’s that piece:
And the key is in the subheading: You could end up paying 36% interest on this cash advance.
That’s higher than most credit cards currently — though cheaper than a payday loan.
One consumer advocate calls earned wage access products with fees like this “kinder, gentler payday loans.”
