Earned wage access (EWA) offers employees a chance to access their earnings ahead of the regular payday. Rather than the usual wait for a bi-weekly paycheck, this option empowers workers to withdraw a portion of their earned income whenever they find it necessary.
EWA is a financial benefit that lets employees control when they receive their pay, typically for a small fee. Access to your pay early can be a financial lifeline, steering clear of the high costs associated with payday loans and potentially enhancing financial stability. Read on to learn more about EWA in this guide.
See EWA offers (and others) from our network of financial partners.
How does earned wage access work?
Earned wage access is a financial service offered by private companies and is not affiliated with government programs. The service is available to employees who have earned wages that have not yet been paid out, typically because they are between pay periods.
EWA is accessible through different methods. Some employers offer it as a benefit, integrating the service with their payroll systems. In this setup, employees can request an advance on the wages they’ve already earned directly through an app or a website associated with their employer’s EWA provider.
Workers whose employers do not offer EWA can access independent cash advance apps. These apps require users to sign up, connect their bank account, and verify their employment. The app will track the hours worked and offer a portion of the earned income.
You could also use overdraft apps that provide a safety net by advancing funds to cover expenses that exceed an individual’s bank account balance, preventing overdraft fees.
To use EWA, you’ll need to meet the criteria of the service provider, which generally includes having a verifiable source of steady income and a bank account.
Why should you consider using earned wage access?
If you often find yourself strapped before payday or you’ve got bills that pop up out of nowhere, EWA can step in to make things easier. It lets you pull out some of your paycheck ahead of schedule, which can be a big relief.
But here’s the kicker: you have to use it wisely. Think of EWA like an emergency kit — it’s there when you need it, but you shouldn’t dip into it for just any reason. Every time you tap into your earnings early, there might be a fee. So you don’t want to go for it unless you really need it.
3 types of earned wage access
EWA is often particularly valuable when there’s an unexpected crisis and you need money right away. It’s a way to avoid overdraft fees as well.
When choosing an EWA service, consider your payroll provider’s options, the potential for emergency expenses, and your personal financial management habits. The goal is to enhance your financial well-being without incurring unnecessary fees or dependency on services like payday lenders, which can have high interest rates and unfavorable terms.
Employer-based programs
EWA options offered by your employer are tied into the company’s payroll system, providing a streamlined way for workers to receive a paycheck advance. They’re a popular employee benefit as they can prevent the need to turn to payday lenders with high interest rates. For instance, Payactiv is one service that doesn’t require a credit check, uses payroll data to determine the amount you can withdraw, and often comes with no transfer fee.
Purpose: Use it to pay off pressing bills
Example: Payactiv
Pros
- Free to enroll
- No credit check required (eligibility by payroll info)
- Often integrated with the employer’s payroll system, which can allow for seamless transactions and quick access to earned wages
Cons
- Employer must participate
- Availability of funds may be limited to the number of times you can access your earned wages within a pay period
Cash advance apps
These apps offer a cash advance against your next paycheck directly to your bank account or debit card, like MoneyLion InstacashSM. They’re a handy tool for getting cash quickly without the high costs associated with payday loans. They often work by analyzing your payroll cycle to safely offer a pay advance without the risk of an overdraft.
Purpose: Use it to pay immediate expenses, like bills or payments
Example: Instacash*
Pros
- No credit check (eligibility linked bank account info)
- No or low interest rate based on your financial profile
- Delivery options within minutes, providing timely financial support
Overdraft apps
Apps such as Chime SpotMe are designed to protect you from overdraft fees if your bank account balance falls below zero. They can provide peace of mind for those who have irregular pay cycles or who need emergency savings back up. These apps might allow you to receive your paycheck a few days early, which can be a significant advantage in managing your cash flow.
Purpose: Use it to pay immediate expenses, like bills or payments
Example: Chime SpotMe
Pros
- No fees
- Covers fees for going over your checking account
- Get paid 2 days early for deposits
Cons
- Not a guaranteed feature
- Need direct deposit
Earned Wage Access — A Financial Back-Up System That Has Your Back
EWA is a great example of a fintech system that helps put regular people in the driver’s seat on their financial journeys. You did the work, so why should you need to wait a long time to get paid, especially when you’re experiencing a temporary financial hardship? Explore EWA’s benefits to get back on track when you’re approaching an unexpected financial turn.
FAQ
What are the requirements for each program?
Employer-based EWA programs require an employer’s participation and may necessitate a direct deposit into a bank account tied to the payroll system. Cash advance apps usually require a user to link their bank account and provide details on their pay cycle to ensure eligibility for advances.
What are the interest rates on cash advances?
Cash advances through EWA services typically do not involve interest rates since they’re not considered loans but advances on earned wages. However, if opting for a payday loan, interest rates can vary and are often substantially higher than traditional loan products.
What are the biggest fees?
Fees associated with EWA vary, but common charges include a transfer fee for accessing wages in a faster way or a subscription fee for the service. Unlike payday loans or overdraft fees from banks, EWA services aim to offer a more affordable alternative for accessing earned wages ahead of the standard pay cycle.
How much money can I get?
The amount available through EWA services depends on the earned wages an employee has accrued during their payroll cycle. It is not a loan but a portion of the paycheck they have already earned. For cash advances from payday lenders, the amounts can be higher but come with the caveat of fees and interest.
How long do I have to pay off my cash advance?
Repayment for an advance through EWA services is typically aligned with the next payday, where the advanced amount is automatically deducted from the paycheck deposited into the employee’s bank account.
How long does it take to get money?
The timeframe for receiving money through EWA services can be very quick, sometimes within the same day, depending on the payroll provider’s efficiency. Cash advance apps and payday loans might require a longer processing time.
What happens if I don’t pay?
For EWA services, the repayment is usually taken out of your next paycheck, minimizing the risk of non-payment.
Is earned wage access classified as a loan?
EWA is not classified as a loan but as an advance on wages that have been earned within the pay cycle. As a result, it typically doesn’t involve interest rates or the rigorous application process associated with loans.
Will using earned wage access affect my credit score?
Utilizing EWA services generally does not impact your credit score because it’s not considered a loan and therefore is not reported to credit bureaus.
Can I access my full paycheck early?
Access to a full paycheck early is typically not available with EWA services to prevent financial mismanagement and maintain regular payroll cycles.
Are there any limits to how often I can use earned wage access?
Limits on the frequency of using EWA services can be set by the employer or the EWA provider to encourage responsible financial behavior and ensure that employees do not become overly reliant on accessing wages before their regular payday.
Can I use the money for non-essential expenses?
While there are no restrictions on how you can use the funds obtained through EWA services, it is recommended to prioritize essential expenses to avoid potential financial shortfalls in the future.
Is earned wage access available for self-employed individuals?
EWA services are typically tailored for individuals employed by a company with a regular pay cycle and are not generally available for self-employed individuals.
