One of my friends at Consolidated Credit is Sandra Tobon, our director of housing counseling. Last week, Sandra wrote this…
Much of the research about home prices is conducted by firms that sell real estate. That makes sense, since they have a financial incentive to know exactly what’s happening with sellers and buyers. While their research is often accurate, their conclusions can be a little…optimistic. After all, they’re in the business of selling homes, so they need to spin the bad news to convince Americans to buy.
That made me laugh, because I see that happen all the time in my own field of financial education. It happened just yesterday when I saw this headline: “More than Half of Americans Run Low on Money Before Payday.”
This poll, sponsored by Wells Fargo, asked 2,000 working Americans about their paychecks. The most worrisome results were…
- “54% regularly run low on money in the days leading up to payday.”
- “Americans spend 40% of their paycheck within the first 48 hours of being paid.”
The proposed solution to this problem? The pollsters suggest, “Banking features like early pay access allow extra flexibility to close that gap.”
What is “early pay”?
Banks are increasingly offering a new service: Get access to your regular paycheck two business days before those funds actually show up in your account.
“There’s no enrollment required and no fee,” Wells Fargo says.
But no fee doesn’t mean no cost. First, you need to open a bank account with a higher minimum balance, or you pay a $15 monthly fee. Second, it doesn’t really solve the problem the poll revealed.
Better early than never
If you’re struggling to make ends meet, then accessing your paycheck two days early certainly helps – a little. But if you need those 48 hours to pay your bills on time, you face much more than a time crunch. You’re suffering from a major cash crunch. And no bank can fix that for you.
If you’re like the 54% of poll respondents who “run low on money in the days leading up to payday,” you need an institution that addresses your debts instead of simply holding your money. You need a nonprofit credit counseling agency.
If you’re nervously awaiting payday, it’s probably because you’re carrying steep credit card balances each month. With the average credit card interest rate well over 20%, that’s a huge chunk of your paycheck that goes to a large company – often a bank that issued your credit card!
Like early pay, a call to a certified credit counselor is free. Unlike early pay, you have no obligation to work with us – even after we give you a free in-depth analysis that often helps you plan for a debt-free life. That’s better than early pay. It’s early happiness.
