Services that provide early access to pay help employees with cash flow; employers with financial literacy programs show how to use the services wisely.

Earned wage access (EWA) services that provide on-demand pay are used by over 10 million workers in the U.S. People primarily use EWA apps to help manage personal cash flow. But how do these apps work and why do some employers offer them as a benefit? Let’s take a look.

EWA services provide employees with faster access to wages

Going paycheck to paycheck is a long stretch for many people, especially for those who find it difficult to afford basic living expenses. Earned wage access (EWA) allows workers to request up to 50% of their earned wages for a pay period before their scheduled payday.

Third parties—like DailyPay, Payactiv, Tapcheck and others—provide EWA service via an app for a fee that may be paid by the employer, employee or both. Flat-rate transaction fees run about $2.50 to $3.50 to get funds the next business day, and, with some services, an additional fee of $4 allows employees to access their wages instantly. The amount of funds requested early is typically between $35 and $200; most requests are under $100.

EWA services operate under two models. One is where the employer partners with a service and allows access to its payroll system. Employees who access wages early through employer-partnered services receive the balance of their pay on payday. In the second model, employers are not involved and the EWA company works directly with employees to provide an advance on wages. In the direct model, the EWA service deducts the amount of the advance from the employee’s bank account after their payroll deposit is made.

Who uses EWA services?

“Data shows that EWA products are primarily used by younger individuals—most under the age of 50—and are more commonly relied upon by low-income households (i.e., those earning less than $50,000),” according to a report by the Evans Policy Innovation Collaborative at the University of Washington.

The Evans report also shows that people at all income levels use EWA services, but why they do so varies somewhat. Those at lower incomes use the money for things like rent, mitigating cash flow deficits and paying for bills and unexpected expenses. Folks in the middle (earning more than $50,000 but less than $100,000 annually) access their pay early to cover bills before payday and for unexpected expenses. Those with income above $100,000 use EWA services to manage cash flow deficits and pay bills that are due before payday.

Users of EWA services access the platforms 10 to 33 times per year.

EWA services are most commonly used as an employee benefit in industries with high employee turnover rates, like food service, retail and hospitality.

What are the rules for EWA services?

There are no credit checks for employees who use Earned Wage Access and there’s considerable debate about whether EWA funds deposited in employee savings and checking accounts should be considered loans.

A December 2025 advisory opinion from the federal Consumer Financial Protection Bureau announced that EWA funds are not considered credit under the Truth in Lending Act. States are not in agreement about how to treat EWA advances. Three classify the advances as loans while nine others have passed laws that say EWA advances are not loans.

In Michigan, the treatment of EWA advances is currently under debate by the legislature. MI HB 5568 calls for the licensure of EWA services and MI HB 5569 proposes to exempt EWA companies from state law that prohibits usury, or excessively high interest.

Why employees like earned wage access

Without more frequent access to wages earned, many people turn to other borrowing methods to make ends meet. Short-term financing through payday loans, auto title loans and pawn loans come with high interest rates and finance charges. EWA can be less expensive than other short-term options.

What proponents and critics of earned wage access say

Employers who offer EWA as a benefit view it as a way to relieve employees’ financial stress and give them more control over their finances. Other proponents say early access to wages helps employees avoid the high costs of predatory payday loans and avoid overdraft fees on checks they can’t cover. Also, users of EWA services can’t be turned over for debt collection or be subject to lawsuits in the event of nonpayment.

Critics view EWA services as a contributor to perpetual debt and their fees excessive and difficult to compare between lenders.

The effective annual percentage rate for accessing early wages through third parties can be extraordinarily high. Authors of the Evans report did the math that shows just how high:

A $100 wage advance with a $4.00 fee and a seven-day maturity period has an estimated APR of 209 percent. The shorter the maturity, the higher the APR. If the maturity period for the $100 wage advance with a $4.00 fee were 10 days, the APR on the wage advance would be 146 percent. If the maturity period were 14 days, the APR

would be 104 percent. Additionally, the smaller the wage advance, the higher the APR. If the transaction were for a $50 wage advance with a $4 fee and a 7-day maturity period, the APR on the transaction would be 417 percent. If the transaction were for $250, the APR would be 83 percent.

In addition to transaction fees, some EWA services ask for a, “suggested tip of 10%” with each transaction.

Pairing early access to wages with financial literacy

Employers who offer EWA service as a benefit often pair it with a financial literacy program so employees learn how use pay advances wisely. For example, workers who frequently access their pay early should understand that they’d be better off taking fewer larger wage advances rather than several smaller ones because fees are charged per transaction.

Give your employees the benefit of financial literacy

The Consumers @Work program brings free financial education programs through on-site and online services. To support your employees with financial literacy, contact an @Work representative.

 

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