In late 2017, Walmart announced a new effort to help employees manage their pay — an app called “Even." The new app can help employees manage their paychecks, plan ahead for bills and figure out their discretionary spending.
Walmart plans to cover the expense of the app for employees. In addition to the money management tools, it comes with a feature called “Instapay,” which allows Walmart employees to access their pay early when they run out of cash or “when unexpected expenses occur,” said Walmart in a press release.
Should you get your paycheck early?
If you’re a Walmart employee curious about Even or eager to get your paycheck earlier than usual, think twice before you start a new habit. Use of the Instapay feature isn’t free — at least not forever.
“Walmart will cover the entire cost of Even’s automated financial management tool for both hourly and salaried associates, and will ensure associates can use Instapay up to eight times per year for free,” Walmart said.
Walmart will subsidize the cost if employees need to access their paychecks early more than eight times per year.
The question remains: “Should Walmart employees or other workers who can access their funds early do so?” Here are some pros and cons.
Pros of getting your paycheck early
You can avoid more expensive loans. Walmart wants the app to help workers avoid costly borrowing options, which could include payday loans. If your options are accessing your paycheck early or taking out a payday loan — which could have an APR of almost 400%, according to the Consumer Financial Protection Bureau — getting paid early will likely leave you better off.
You can avoid a bank overdraft. A bank can levy an overdraft charge if you don’t have enough money in your account to cover your purchases. These fees typically cost around $31, CFPB said, but they can set off a domino effect since you may also owe fees for checks you’ve written that don’t clear. If accessing your pay early can help you avoid overdraft fees, doing so could make financial sense.
You can temporarily solve cash flow issues. If payday isn’t here yet and you need groceries or gas, getting paid early can help you improve cash flow and cover important expenses.
Cons of getting your paycheck early
You could start a difficult-to-break cycle. In addition to exorbitant interest rates, part of the problem with payday loans is they get people used to accessing their money early. When you get paid early, this stretches the time you must wait before you get paid again. If you get in the habit of getting paid early, it may become harder to stretch your funds until the next payday, creating a vicious cycle in which you need to get paid early to cover bills.
Getting paid early may not be free. Walmart’s Instapay feature charges a fee to get paid early after you use it eight times in a year. Other businesses who offer an “early pay” option might charge fees as well, so make sure to check when and how much.
Accessing your paycheck early may make it harder to budget. If you are supposed to get paid every two weeks but continually take advantage of early pay options, it might be difficult to remember what you can afford.
“With on-demand access to earned wages, Walmart associates will be able to save more, avoid the financial traps that reduce their take-home pay, and get a level of stability that few service sector employers provide,” said Safwan Shah, founder and CEO of PayActiv, which partnered with Walmart on the Even app.
But this may not be true for every worker. Early pay may create the opposite situation for workers by forcing them into situations in which they have no choice but to pay a fee to get paid early.
The bottom line
In January, Walmart promised to increase starting wages to $11 per hour nationally, expand parental leave benefits and dole out cash bonuses to some employees. This new wage represents a huge disparity from the federal minimum wage, which is still $7.25 per hour.
This move is a good thing for Walmart employees. It's less clear whether Instapay will be a net positive for the workers it is supposed to help.