The Hustle

Would you pay for your own paycheck? Wage access apps think so

One hand holding a blank check and another in a sweatshirt holding a smartphone with an animated money sign on the screen.

It turns out our personal finances are in as bleak a state as they feel.

More than one-third of Americans say they couldn’t cover a $400 emergency expense in cash, and the average consumer has ~$5.7k in credit card debt.

To shorten the time between paychecks, more people are turning to wage access apps — services that offer users early access to earned funds in exchange for a fee, per Vox.

The apps fall into two categories:

The demand for both is rising: Consumers obtained $9.5B through early wage access companies in 2020, up from $3.2B in 2018.

But who uses them? And why?

These apps are particularly popular among low-wage workers in industries like food service, gig work, and retail.

Their popularity hinges on the fact that workers are often not paid enough (the federal minimum wage is $7.25 an hour) or are paid too slowly.

And they aren’t used for unnecessary splurges: 80% of consumers rely on the apps to pay for essential expenses like groceries, rent, and child care.

There are plenty of issues

Since wage access apps are essentially loans, they come with a heaping side of fine print — and fees:

These fees add up quickly, and a recent report found fees for early wage access programs averaged an annual interest rate of more than 300%.

Early wage access apps are new…

… and states are still deciding how to regulate them. So far, Connecticut has passed legislation defining them as loans, and California is close behind.

Ultimately, all this discourse highlights the long-standing issue that low-wage American workers are often penalized when struggling to make a living wage.

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