Waiting for your next paycheck to come in can be a true test of your patience. You count down the days until those funds end up in your checking account so that you can finally take care of your financial needs. What if you didn’t have to follow this pattern? What if you didn’t have to wait for payday to access your earnings? This is what on-demand pay offers.
What Is On-Demand Pay?
On-demand pay is a workplace arrangement that allows employees to request and receive a portion of their earnings before their official payday. The employee will receive the remainder of their earnings on payday. The arrangement is sometimes called earned wage access (EWA).
On-demand pay isn’t like a credit system. You aren’t borrowing funds from your employer — you are simply getting the funds that you’ve earned earlier than the set payday. You don’t need to make any repayments after the funds are deposited into your business account.
There are some limitations to this payment feature. Employers may restrict how much you can request at a time (for instance, only offering the day’s wage). There may be a processing fee to use this on-demand service. However, many employers will take on that fee for their employees.
What Is the Benefit of On-Demand Pay?
The main benefit of on-demand pay is that it can help you handle essential expenses before payday. If a bill is due before your paycheck comes in, you can use the on-demand feature to get enough funds to pay it on time. If your checking account is getting close to empty, you can use the feature to give the account a little padding before payday. You can use it to avoid problems like late fees, bounced checks and overdraft fees.
It will also help you with emergencies, too. Emergencies are unpredictable. You never know when your car is going to break down in the middle of traffic or when your roof is going to spring a leak. They won’t necessarily coincide with your payroll schedule.
So, if an emergency to categorize expense crops up a few days before your paycheck is supposed to come in, you don’t have to panic. With on-demand pay, you can get some of your earnings early and handle the expense immediately.
What Can You Do Without On-Demand Pay?
Ideally, you will have an emergency fund available. You can withdraw the necessary amount of savings from your fund to cover your emergency expense right away. This safety net will make sure that you don’t have to rely on your paycheck whenever something goes wrong.
If you don’t have an emergency fund, you could turn to credit as a solution. Charge the expense to your credit card and then pay down the balance after your paycheck comes in. You should only take this step when your card’s balance is low. Otherwise, you could risk maxing out your credit card and giving yourself more financial trouble to contend with.
Another credit tool that you can use to cover emergency expenses is a personal line of credit. If you don’t have a personal line of credit already, you can go to the website CreditFresh and see whether you meet the qualifications to apply. As long as you meet the qualifications, you can send in an application online and wait to hear about your approval. You just might get approved for one.
Use this safety net to your advantage and get your earnings early and for financial success.