The Top 2 Reasons Getting a Daily Paycheck Is a Bad Idea

Accessing your earned wages every day can harm you financially.

Key points

• Same-day payment can be expensive, but free options are available.
• Spending your money as you earn it could leave you short of funds for rent or other major expenses.

When you are in dire need of cash and you are running out of funds, payday can feel like an eternity. You might wonder (rightly) if it makes sense to let someone else sit on the money you’ve already earned, especially if you need it today. This is where the daily paycheck comes in. Before pressing an app to deposit today’s pay into your bank account, consider the potential downsides of same-day pay.

1. Daily pay can be expensive

Many daily pay platforms charge a fee when you access your money before payday. Whenever possible, try to avoid spending money to get your salary. If you run out of money between paydays, those extra few dollars are better off in your pocket, not in the app. A few dollars may not seem like much, but the costs add up.

Depending on how often you access Daily Payment and the amount of the fees, your total cost might even end up being higher than it would have been had you overdrafted your account or paid a late fee.

Daily Pay is advertised as an alternative to payday loans, which can be so expensive that they easily trap the borrower in a difficult-to-break cycle of debt. Yes, even a $40 fee is cheaper than most payday loans. But several apps and services already exist that allow you to get a free cash advance, in many cases without a credit check.

2. The daily salary can make it harder to manage big expenses

Perhaps the biggest risk with daily pay is the possibility that you overspend and don’t set aside enough to cover large expenses that come up at regular intervals, like rent and utility bills. Sure, it’s nice to get your paycheck every day without having to wait, but even a disciplined person can have trouble budgeting for their daily paycheck.

Be realistic when looking at your spending and saving habits. Also think about what you could do if you had to take unscheduled unpaid days off after you’ve already accessed and spent the money you earned earlier in the pay period.

If saving money isn’t your style, the Daily Paycheck may not help you create financial security.

Do this instead

• Check out cash advance apps. MoneyLion is free, Dave costs $1 per month. They both offer free cash advances, but you have to be ready first. Before you can get a cash advance, you’ll need to verify your identity, link your bank account, and download the app. Once you’re ready, a free cash advance takes 12-48 hours.
• Know your budget. If you often run out of money, you may need to better understand your income and expenses. Pick a free budgeting app and track all your income and expenses for a while. This will help you develop the ability to forecast your financial needs, and you might even find areas where you can reduce your expenses.
• Start saving money. Whether you’ve never had money in a savings account or you’ve had to deplete it due to unexpected expenses, needing a same-day paycheck means you don’t have enough reserves – even for an amount as small as a day’s pay – – to manage a financial emergency. Start saving now, even if it’s just $10 or $20 per payday or month. Open a high yield savings account online. Choose an account with no monthly maintenance fees. A good first goal is $1,000, but then work to increase your balance to an amount that will pay all your expenses for three months without any additional income.

The Daily Wage Can’t Ease a Paycheck-to-Paycheck Lifestyle

If you’re living paycheck to paycheck, getting your paycheck faster isn’t the solution. It’s more about finding a way to create a financial buffer. You don’t need to pay daily for financial security. You can create this stamp yourself.

If you can, continue to receive your salary on a bi-weekly or weekly schedule. Most people find it easier to pay big bills when their money comes in big chunks. For example, some people who get paid every two weeks spend one paycheck on rent and the next paycheck on everything else.

Having enough cash on hand to cover small and moderate expenses will reduce your stress level as well as your overall costs.