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Your Company’s Early Wage Access or Pay Advance “Benefit” is Actually Costing You More

Your Company’s Early Wage Access or Pay Advance “Benefit” is Actually Costing You More

Americans Deserve Early Wage Access 

Early Wage Access is built on a simple thought – Working Americans deserve immediate access to their pay. CFOs of the world’s major corporations work hard to manage their cash cycle – how quickly their corporation gets paid by customers and how long they can stretch out their vendors.  This is so they can start earning interest immediately, pay off debts swiftly, and be in control of finances instead of being susceptible to other companies’ timelines. 

The chart below shows the distribution of pay frequencies in the US.

Chart showing the Frequency of Pay Periods which is majority Biweekly paid, followed by Weekly pay, then semi-monthly and monthly
Debit Card Spending Statista 2023

Workers do not just have to wait for the end of the pay period.  They must also wait for their employer to process payroll calculations, initiate a transfer of funds (with direct deposit), and for employee’s bank to receive the funds from the employer’s bank.  This process takes approximately 7 days in most cases.  

The chart below is from an extreme case for a school district in Texas which has a Monthly Pay and a 3-4 week payroll processing cycle.  In other words, a new employee would have to wait 7-8 weeks to receive their first paycheck in the bank account!

Payroll chart showing teachers pay frequencies and payroll cut off dates

Early Access to Earned Wages Eliminates Late and Overdraft Fees Paid 

For consumers like you and me, the power of instant access to wages is the ability to manage your cash cycle.  The chart below shows the results of a survey of 1600 customers with Earned Wage Access and its impact on Late Payment Fees and Overdraft Fees.  

The percentage of customers reporting no Late Payment Fees or Overdraft Fees increased from 32% before Earned Wage Access to 74% after Earned Wage Access!

Chart showing no late fees incurred when employees have access to early wages

The movement to Instant Wage Access has begun and is unlikely to subside.  Employees at the 2 largest employers in the US, Walmart and Amazon, already enjoy the benefits of Earned Wage Access.  Many other companies in the Hospitality, Retail, and Food Service industries have started offering Earned Wage Access.  The industry begun in earnest based on initial regulatory rulings made by the Consumer Financial Protection Bureau (CFPB) and State Regulatory Agencies, which allowed EWA providers to offer Earned Wage Access and not be regulated under lending laws.  In effect, EWA, for now is not treated as a Loan. 

 As a result, the fees associated with Earned Wage Access Advances are not quoted with their equivalent annualized interest rate.

The Dark Side of the Current Approach to Early Wage Access

Many models are designed around customer fees which equate to extreme interest rates.  A common structure is charging a $2.99 fee per paycheck advance.  The chart below shows the interest rate associated with a $2.99 fee and how it compares to average Payday Loan interest rates.  

As the chart shows, the $2.99 fee EXCEEDS payday loan interest rates in some cases. 

Chart showing how early wage access fees can be equal or greater to average payday loan interest rates, when annualized for comparison

The calculation of annualized interest rate is done assuming an average payroll period of 2 weeks and 7 days after the end of the pay period for a direct deposit to reach the employee’s bank account.  This gives us an average loan duration of 2 weeks.  The interest collected by the EWA provider for the 2-week loan is the $2.99 fee divided by the advance amount.  For a $100 advance, this would be 2.99%.  This is compounded 26 times to convert it from an interest rate for 2 weeks to 52 weeks, which you’ll see below as an annualized rate for an apples-to-apples comparison. 

Below is data collected by the Financial Health Network for the average fees charged to employees to access wage advances in 4 employer programs. 

Early Wage Access Fees are Comparable to Payday Loan Fees in many Cases 

Assuming the companies use the average payroll period of 14 days and take 7 days for the direct deposit to reach the employee’s account, this would yield an annualized interest of 93 – 229%, as shown below!  200%+ is higher than the average Payday Loan interest rate in a number of states.

The Earned Wage Access industry has evolved this way because it is a fairly simple model to implement once the regulatory loophole from the CFPB is obtained.  Calculate the employee’s wages, make advances, and recover advances from Direct Deposit or Employer.  It is a technology-light model that is quick and easy to implement that works as long as there is no pushback on the high interest rates.  In addition, the Consumer Financial Protection Bureau implemented temporary rulings allowing Earned Wage Access to move forward WITHOUT being considered a “loan.”  However, in a ruling last year, the CFPB cancelled an agreement with Payactiv and notified the industry that it will be reviewing Earned Wage Access and offering further clarification.

This month, attempts to regulate earned wage access has ramped up, and multiple states are set to pass laws to define and force companies to be more clear about services being treated as payday loans instead of Early Wage Access. The States of Georgia, Kansas, Texas and Virginia have introduced bills already, while others like New Jersey and New York have attempted these efforts in the past. We anticipate these actions to continue, with more urgency this year.

What Grit Financial Believes Employers Should Consider Before the Impending CFPB Audit 

Many employers make decisions based on trends which appear to offer “safety.”  However, in this case, there is considerable reason to believe that “safety” may not be long-lasting.  

Grit believes that employers must ask themselves:

“Would I be ok explaining to an Employee, Reporter, Your Board of Directors, or Government Agency your decision to offer an Earned Wage Access program which charges fees of 100%+ and positioning the offering as an employee benefit?”

When the CFPB conducts its review, there will be numerous consumer groups ensuring that the effective annualized interest rate of EWA charges will be considered by the CFPB.  In addition, given the relative size and profile of the EWA providers vs EWA customers, it is highly unlikely that Employers will not become part of the review process and be asked to explain their thinking on the offering they approved and actively offered to their employees.

What the EWA industry really needs is a new model that is not an app-based version of Payday Loans.  

Grit Financial Pays its Members to Take Early Wage Advances 

That is exactly what Grit has focused on – evolving EWA into a truly sustainable model.  Grit has built a model that no one thought was possible:


If an advance is taken and spent on a Grit VISA Debit Card, we pay you to take the advance by giving you 0.5% cashback and 3% interest on account balances.  Grit can do this because we built a technology infrastructure that allows us the ability to make money through Merchant Fees paid on Debit Card Charges.  We believe this is the first truly sustainable Payroll Advance model because it not only does not penalize the customer for needing access to what they have earned, it REWARDS them for accessing what they have earned.


We believe that in the future, our approach to Earned Wage Access will be the only approach.

Sign up for Grit and start earning today.

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Wendy Oliver

A seasoned lawyer and legal compliance expert specializing in the financial sector, Wendy has worked in large law firms and as in-house counsel for companies such as Bank of America and OnPoint Credit Union, and educational institutions such as the University of Chicago and Duke University. She’s also worked at a fintech startup, a consumer lender and a large credit union, as well as running her own practice advising financial institutions.
Well-versed in the ins and outs of disclosures and agreements, contracts and corporate matters, Wendy is most excited about helping others to achieve financial stability, something she had to grapple with herself in her younger years and as a law student. Her goal is to ensure Grit’s financial wellness tools not only help people through financial emergencies, but also establish long-term habits for financial success.
How she got her financial grit: “In college, when I was living off loans and part-time work, I had a budget and that really helped me. After college and law school I had loans to pay. Budgeting and understanding where your money goes can really make a difference in your financial security.”


  • General Counsel, OnPoint Credit Union
  • Chief Compliance Officer, Aven
  • Asst. General Counsel, Bank of America
  • Duke, U. of Mich, U of Chicago


  • Led compliance function for the industry’s first Home Equity backed Credit Card
  • First GC at Oregon’s largest credit union preparing institution for crossing $10B threshold


  • 30+ years of experience in Banking Legal and Compliance including Startups, Scale Players, & Regional Players