July 30, 2024

Earned Wage Access: Everything You Need to Know

Having a hard time managing your money? Want to get paid more frequently than just once or twice per month? Earned Wage Access (EWA) may be the solution you're looking for.

But what exactly is Earned Wage Access? How does it work? And how do you sign up for it? Let's find out!!

What Is Earned Wage Access?

If you're an employee, you know that waiting for your next paycheck to land in your bank account can sometimes be a pain. After all, life happens—and if you find yourself needing extra cash before payday, there's no easy way to get it.
Earned Wage Access, also known as on-demand pay, instant pay, or accrued wage access, is one solution to this problem.

The idea behind Earned Wage Access is that employees get to access a portion of their earned wages before their next scheduled paycheck. This means they can avoid missing out on important financial obligations because they don't have enough cash on hand.

How Does Earned Wage Access Work?

In an Earned Wage Access program, an EWA provider allows employees to access a portion of their earned wages, which are distributed to them before payday.

The EWA provider will then recover the funds through bank debits or payroll deductions on the employees' scheduled payday. They may offer this service at a flat fee to the employer or charge a fee for each transaction.

Earned Wage Access programs generally have the following features:

The Earned Wage Access program provider either works with an employer to provide EWA services to its employees or works directly with employees.
The amount of each advance is limited to an employee's earnings up to the date and time of the transaction.
If the Earned Wage Access provider fails to recover the funds, it has no legal recourse against the employee. However, this does not prevent the provider from denying future transactions from that worker.
The EWA provider does not directly or through any third party assess an employee's credit risk.
The Earned Wage Access provider does not engage in any debt collection activities.

Earned Wage Access Business Models

Earned Wage Access providers have designed programs with a wide range of business models and fee structures.

There are two main approaches to EWA services—the employer-based model and the direct-to-consumer (D2C) approach.

Employer-based model

Employer-based models for early wage access typically involve employer partnerships with an Earned Wage Access provider.

When the advance is scheduled to be repaid, these providers deduct the funds directly from employees' paychecks. The service fee is usually covered by either an employer, an employee or both.

Direct-to-Consumer Model

The Direct-to-Consumer Earned Wage Access model offers early access to funds to individuals with regular income—who receive direct deposits from an employer/business. D2C is available to a broader range of customers, including gig economy workers and non-profit employees.

Consumers can pay for this product through a subscription fee, a per-transaction fee, or a voluntary tip amount. However, most EWA providers offer customers a no-fee version of their service.

What Are the Benefits of Earned Wage Access for Employees?

As an employee, accessing your earned wages whenever you need them is a crucial part of financial independence. It not only gives you more control over your finances but also helps you have peace of mind.

Here are seven earned wage access benefits employees can expect.

1. Helps Employees Pay Bills on Time

Paying bills is easy and stress-free with Earned Wage Access because employees get the money they've earned when they need it. No more scrambling at the last minute to find money for rent or car payments!

2. Covers Unexpected Expenses

You never know when an unexpected expense might pop up—a flat tire, or a hospitalization, a necessary house repair. With earned wage access, these expenses won't ruin an employee’s budget. Their paychecks will cover them instead of credit cards or loans with high-interest rates.

3. Reduces Reliance on Credit Cards

Credit cards are often the easiest way to pay for things, but they also come with high interest rates and fees that can add up to thousands of dollars in debt. The more access employees have to their earned money, the less likely they are to rely on credit cards to get by when money gets tight.

4. Prevents Overdraft Fees

Overdraft fees are a huge problem in the United States, especially for low-wage workers who rely on their paychecks.

Earned wage access means employees never have to worry about a negative account balance. They’ll always have enough money to cover any transaction/ withdrawal, preventing them from overdrawing their accounts or incurring extra fees.

5. Helps Employees Avoid Predatory Loans and Debt Traps

Employees who don't have access to their paychecks until payday can be tempted to take out a loan from unethical lenders with sky-high interest rates. These predatory loans can trap them in a cycle of debt that is nearly impossible to escape.

6. Control Over Their Finances

With earned wage access, employees have more control over their finances. They can pay their bills on time and keep an eye on their budget without worrying about overdrafts or other penalties.

7. Peace of Mind

When employees have early wage access, they know they'll always have enough money in their bank account. The peace of mind that comes from this kind of access can be invaluable for employees trying to make ends meet while living paycheck to paycheck.

How Does Earnin Work?

Earnin is your ally in the fight against overdrafts, late fees and bounced checks. With more than 125 million EWA transactions, Earnin has given its members access to over $10 billion in earnings.

So how does Earnin work?

Earnin uses a Direct-to-Consumer model, which makes their services available to anyone with a steady paycheck. More specifically, any U.S. employee who gets their paycheck through direct deposit can get access to Earnin.

Through its main Earned Wage Access tool users are able to access a portion of their earnings any time before their payday.

Its members also have an option to tip when they are satisfied with the financial services provided. However, they will not lose access to any of Earnin's financial tools if they choose not to tip.

Furthermore, Earnin does not charge fees or interest for its service. It is designed as a non-recourse financial tool, meaning Earnin will absorb the cost of any unrecovered Cash Out.

Work Today, Get Paid Today

At Earnin, we know that you may need some extra cash before payday—and we don't want to make it harder for you to get it. That's why we introduced Cash Out.
With Cash Out, members can get up to $100 per day and withdraw up to $750 per pay period from their earned money before payday!

What's more, we will never charge you mandatory fees or a service fee for any transaction. You have an option to tip, but that's completely up to you!
Earnin also works with your existing bank account, so you can easily get the money you need through direct deposit. Any Cash Out amount or tips will automatically be deducted on payday!

So what are you waiting for? Download the app and start getting your hard-earned money, today.