What is a Pay Advance and Should You Consider It?

A pay advance gives you early access to your wages before your next payday. There are many service providers that offer pay advances, such as Paytime, MyPayFast, or Wagepay. We’ll break down the pros and cons of using a wage advance service and how they work.

Key Takeaways

  • Wage advance services allows you access to your wages or salary before it’s paid
  • They are a fast way to get money and can be advantageous if you are in an emergency or have an urgent situation
  • Similar to a credit card or personal loan, wage advances come with fees, which means you are ultimately getting paid less than you would if you waited for your normal pay cycle
  • There are pros and cons to weigh up when considering taking a wage advance. If you’re struggling with debt, get in touch with Debt Fix for a free consultation to discuss your situation

Any wages you receive in advance are automatically deducted from your next pay cycle. Then, the service provider will pay you the requested amount, and register the full amount of the deduction on your next pay cycle. This process is done on behalf of your employer, plus their payroll team, so they don’t have to do any extra work.

Most pay advance service providers charge, roughly, a 5 percent transaction fee. So for a $150 pay advance, this equals a $15 transaction fee. You can request to have this transaction fee deducted from your next pay cycle, or gradually taken out over several pay cycles.

More employers are starting to sign up with pay advance service providers, offering pay advance as an employee benefit. Under this arrangement, employees can request a portion of their wages early, without worrying about transaction fees or interest. Companies like Paytime promote this service to employers, promising to improve the financial wellbeing of their staff, without changing the payroll system.

What are the Advantages of Using a Pay Advance Service?

With a pay advance, you receive money before your next pay cycle. So if you want, or need, to pay for something and you don’t have the cash on hand, a pay advance could help you.

Another advantage to a pay advance is the lack of interest. Unlike an unsecured personal loan or credit card, which can have interest rates of up to 20%, a pay advance can attract a 5% transaction fee, equal to the pay advance amount.

Applying for a pay advance is relatively simple and straightforward, too. Typically, you can apply online over the web, or via a dedicated app. Then you submit basic information, such as your requested amount, proof of income, age and permanent residency, bank details, and personal contact details. With the necessary information on hand, the application process takes only a few minutes, and once approved, it takes only a moment for the advance to reach your account.

What are the Disadvantages of Using a Pay Advance Service?

While a pay advance is a relatively easy and efficient way to receive wages early, the service does come with risks.

One downside to using a pay advance service is that it reduces the total amount of your usual pay cycle. This means, if you requested a pay advance for an urgent expense, you will have less money than usual after your next pay cycle. Therefore, if you don’t account for the expenses that you have coming up (right after your next pay cycle), then you could struggle to pay for daily essentials, such as rent, mortgage, utilities, and loan repayments.

Transaction fees are another problem with pay advance services. This can be a problem if you often rely on pay advancements to get by, or if you apply for multiple pay advances – from multiple service providers – at once. Each new transaction equals a new transaction fee. And these, admittedly small, fees can add up to a lot if you’re not careful, causing you to sink further into debt. It gets even worse if you miss those repayments, resulting in associated late fees.

How to Safely Use Pay Advance Services

The key to using pay advance services is to only use them one at a time. Don’t resort to using multiple pay advance services, just so that you can get more of your wages sooner. The various transaction fees will leave you worse off, financially, in the long run, than if you didn’t request a pay advance at all. Stick to one pay advance at a time, and then meet those repayment obligations before you consider using them again.

In addition, consider the timing and amount of your monthly expenses. Figure out if requesting a pay advance (and spending that advance) will impact your ability to meet all your financial obligations. Make sure you have enough money to pay for daily essentials, including rent, mortgage, food, utilities, and transport.

Furthermore, avoid using pay advance services to pay off other debts, such as those from personal loans, Buy Now Pay Later, and credit cards. The transaction fees you accrue will only sink you further into debt.

If you are struggling with debt and need free financial counselling, contact the National Debt Helpline on 1800 007 007 or the Mob Strong Debt Helpline (for Aboriginal and Torres Straight Islander peoples from anywhere in Australia) on 1800 808 408. Both helplines are available from 9:30pm to 4:30pm, Monday to Friday

Request Independent Debt Advice

Are you struggling with debt due to pay advance services? If so, then help is available. At Debt Fix we provide a range of debt relief options to help you regain control of your finances.

Our debt consolidation experts will take the time to understand your unique financial circumstances. They will work with you to help reduce the total amount of your debt. And they will help you establish a monthly repayment schedule, one that fits your needs and budget.

Depending on your circumstances, we can help lower the total amount of you owe. How? By reducing, or eliminating, any associated interest rates or fees. We can also help consolidate multiple debts into one simple, easy to follow monthly repayment schedule. This way, you only keep track of one monthly repayment, as opposed to juggling multiple at once.

Best of all? Your first meeting with a debt consultation is free of charge. And there is no risk of impacting your credit score. So stop lying awake at night, worrying about debt. Contact Debt Fix today. And see how we can help you achieve financial security.

To learn more about our debt consolidation services and other debt help options, talk to a Debt Fix consultant today. Your first consult is obligation free, confidential, and will not impact your credit score. Call 1300 332 834 or enquire online to get started.