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

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

Accessing your earned wages every day can hurt you financially.

When you have an urgent need for cash and you're running low on funds, payday can feel like forever away. You might wonder (rightly) if it makes sense to let someone else sit on money you've already earned, especially if you happen to need it today. This is where the daily paycheck comes in. Before you tap an app to drop today's wages into your bank account, consider the potential disadvantages of same-day pay.

1. Daily pay can be costly

Many daily pay platforms charge a fee when you access your money before payday. To the extent possible, try to avoid spending money to get your pay. If you are running out of cash between paydays, those extra few dollars are better off in your pocket, not the app's. A couple of dollars may not seem like much, but fees add up.

Depending on how often you access daily pay and how much the fee is, your total cost could even end up being greater than it would have been if you had overdrawn your account or paid a late fee.

Daily pay is advertised as an alternative to payday loans, which can be so costly that they easily trap the borrower in a cycle of debt that's hard to break. Yes, even $40 in fees is cheaper than most payday loans. But multiple apps and services already exist that let you get a free cash advance, in many cases with no credit check.

2. Daily pay can make it harder to manage big expenses

Perhaps the biggest risk of daily pay is the possibility that you might overspend and not reserve enough to cover big-ticket items that come at intervals, like rent and utility bills. Sure, it's nice to get your pay every day without having to wait for it, but even a disciplined person can struggle to budget daily pay.

Be realistic when you look at your spending and saving habits. Also, consider what you might do if you have to take any unexpected unpaid days off after you've already accessed and spent the money you earned earlier in the pay period.

If it's not your style to save money, daily pay might 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 all set up 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 to 48 hours.
  • Get to know your budget. If you frequently run short on cash, you might need to get a better understanding of your income and expenses. Choose a free budgeting app and track all of your income and spending for a while. This will help you develop the ability to foresee your financial needs, and you might even find some areas where you can lower your spending.
  • Start saving money. Whether you've never had money in a savings account or you had to deplete it because of unexpected expenses, needing same-day pay means that you don't have enough in reserves -- even in an amount as small as one day's pay -- to handle a financial emergency. Start saving now, even if it's just $10 or $20 each payday or month. Open a high-yield savings account online. Choose an account with no monthly maintenance fee. A good first goal is $1,000, but then strive to increase your balance to an amount that will pay all of your expenses for three months without any additional income.

Daily pay can't relieve a paycheck-to-paycheck lifestyle

If you're living paycheck to paycheck, the solution isn't to get your pay faster. Rather, it's to find a way to create a financial buffer. You don't need daily pay for financial security. You can create that buffer yourself.

If you have the option, continue to get your pay on a biweekly or weekly schedule. Most people find it easier to pay big bills when their money comes in big chunks. For instance, some people who get paid every two weeks put one paycheck toward rent and the next paycheck toward everything else.

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

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