If you’re in a tough spot financially, there will be months when getting your paycheck a little earlier will give you some much-needed relief. The good news is that there are several ways to make this happen—though they’re not all the same.
One option is online salary advances, which are being used by a “growing number of Americans who need cash before their next payday,” said The New York Times. But these advances come with fees. Another option is early direct deposit; if you have a bank account at an institution that offers this, this option can get you paid “up to two days early – or in some cases even sooner, depending on the type of deposit,” said Experian. There are also no fees.
What is early direct deposit?
Early direct deposit “gives bank or credit union customers the opportunity to access their paychecks before their scheduled payday,” said Yahoo FinanceThis can happen when the Automated Clearing House (ACH) network is used to make payments via what is known as direct deposit.
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There is usually a waiting period for the funds to be released, between when your employer processes payroll and when the direct deposit is sent to the bank. But with an early direct deposit, “the bank skips the usual waiting period for the funds to be released,” Scott Lieberman, the founder of TouchdownMoney.com, told US News and World Report.
This means you can access your money sooner – often about two days earlier than usual. For example, according to U.S. News & World Report, “If you get paid twice a month, say on the 15th and 30th, you can now start paying your bills and earning interest as early as the 13th and 28th of each month.”
What is the difference from online salary advances?
While early direct deposit simply lets you access your incoming funds a little sooner, “digital pay advance tools allow workers to receive a portion of their pay early and then pay the money back on their next payday,” according to the Times. Sometimes this option is “available through companies that work with their employers, such as Payactiv, or directly through a number of financial apps, such as Dave and EarnIn.” In contrast, early direct deposit is offered by certain banks.
Another key difference between early direct deposit and online payroll advances is the cost. While “some services offer the advances for free,” it’s often the case that “advances are only free if the worker is willing to wait a few days for the money,” according to the Times. In other words, if they “want the money right away — which is usually the case — they have to pay a fee for ‘instant’ access.”
Another potential cost in salary advance apps is fees called “tips.” While they’re technically optional, “apps can aggressively ask for them, for example by specifying default tip amounts,” with the average “tip” being around $4, according to the Times.
In addition, online salary advances carry the risk of overdraft fees if “an employee’s next paycheck is lower than expected – for example, because the employee was scheduled to work fewer hours – or if it arrives later than planned”, resulting in the account not having sufficient funds “to cover the app debit”.
Since you are not borrowing money with an early direct deposit, there is no risk with this option. Of course, if your deposit is delayed for any reason and withdrawals exceed your account balance, fees may still apply.
Where can you access early direct deposit?
While online payroll advances are accessible through companies and apps, you can get an early direct deposit directly from the bank where you have your checking account. A number of banks already offer this service, and “more and more banks are offering it,” although “your bank may have specific requirements for who qualifies for an early direct deposit,” Yahoo Finance said.
At the time of this writing, the following banks are examples that offer early direct deposit:
- Bank of the Allies
- Capital One
- chase
- Fifth Third Bank
- Huntington Bank
- KeyBank
- PenFed Credit Union
- Wells Fargo
