What's the difference between earned wage access and a loan? How to know which is right for you

Miami Herald

20-06-2025

What's the difference between earned wage access and a loan? How to know which is right for you
When you're hit with a surprise cost like a car repair or medical bill, waiting for payday can be challenging. But sometimes, you don't have to.
Enter earned wage access (EWA), which goes by numerous nicknames - on-demand pay, daily pay, instant pay, same-day pay, instant payroll, and accrued wage access among them - and allows you to snag the money you've earned early. Some companies offer EWA as a company perk, but there are also third-party services that bring it directly to consumers.
With roughly a quarter of households living paycheck-to-paycheck according to a Bank of America report published last year, it's no surprise that some people are flocking to EWA services that can help them cover the cost of groceries, utilities and more. The Consumer Financial Protection Bureau (CFPB) found that the market for earned wage products is growing, with the share of workers using the products at least once a month jumping from 41% in 2021 to nearly 50% in 2022.
But it's important to fully understand how these services work before you take the leap. Consumer banking platform Current explains.
What is earned wage access?
Earned wage access programs allow workers to pocket a portion or all of their paycheck outside their typical payroll cycle. The exact process will vary by program, but here's an example: Say you are usually paid out for your work weekly or bi-weekly. Instead of having to wait until the next day for your money to hit your bank account, you can request to have some of the money come through now (or within a few days, depending on the service) and see the remainder of the paycheck on payday.
Employer-sponsored services require that your employer offer EWA as a benefit, and will use your payroll records to track your earnings and pay out the remainder of your payment on time. Companies that offer EWA - including Uber, Walmart, and McDonald's - often have hourly workers. Direct-to-consumer products determine your EWA limit by analyzing your earnings history.
How is earned wage access different from a loan?
While loans are a way to borrow money and pay it back with interest over a set period of time - from a few months to years - EWA is early access to money you have already earned without having to pay interest. When you use an EWA you're tapping money that is yours, but just doing so before payday. The funds you get early are then excluded from your paycheck.
If you're looking for extra funds to help cover a big expense, like a car repair, "it's probably best to go the loan route," says Ben Loughery, a certified financial planner and founder of Lock Wealth Management. EWA will typically have maximums for how much you can access at once, like $500.
When you borrow money via a personal loan, you'll owe the lender an annual percentage rate (APR) - and those can take a chunk out of your wallet. As of June 11, the average personal loan interest rate was 12.65%, according to Bankrate. The rates can be especially steep for payday loans: Typical two-week payday loans with a $15 fee for every $100 borrowed come out to an APR of almost 400%, the CFPB points out. Plus, if you don't pay back the loan as promised, your credit score can take a hit. That's not a concern with EWA.
Should you choose earned wage access or a loan?
In an ideal world, you have an emergency fund available for when surprise costs arise, and you're managing your cash flow in such a way that you don't need to turn to a loan or EWA, explains Catherine Valega, financial advisor and founder of Green Bee Advisory. But that's not always the case.
"If you have access to earned wage access, it is much better than a payday loan," Valega says. She adds that because many people are more familiar with payday loans, they tend to seek those out first and "shoot themselves in the foot" because they then face high interest rates that take a huge chunk out of the money that should hit their accounts. "With earned interest rates, there's a fee, not an interest rate, and you've completed the work so you have earned that money … I would absolutely start there first."
Loughery says to take caution, especially if you're not good with managing your cash flow. You shouldn't rely on EWA as a long-term fix.
"But if you are in a bind, it could be a great solution," he adds.
How to find an earned wage access product
If your employer offers EWA, there's likely already a service for you to select. But if you're going the third-party route, assess the following features:
Fees. Some services charge subscription fees, fees for accessing your money and/or a fee for accessing your money instantly. Some even ask for an optional tip. Ideally, you'll want to go with a service that provides low or no fees for accessing your money early - it's money you've already earned, after all.
Fund timing: How long will you have to wait for your money? In most cases, you'll see the money hit your account within a few business days. But if you need the money instantly and there's a high fee for receiving the money at a moment's notice, you may want to look elsewhere.
Deposit limit: The amount of your paycheck you can tap early will vary by service. One may allow you to gain access to half your paycheck early, while another could offer to send you just a portion of your daily earnings or set a daily dollar amount limit. Before you choose to go with a EWA service, make sure you will actually be able to get what you need if you're in a tight spot.
This story was produced by Current and reviewed and distributed by Stacker.
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