The concept of wage advance in Australia is relatively new. It is getting explored more and more by the day. At present, there are nearly 33% of Australians that use wage advance apps. It is expected that the numbers will rise further in the coming years.
Wage advance can be a boon to an individual and the economy of the country too. So, it becomes all the more important to first understand the concept before using it. A careful analysis is a must before making any money-related decisions. After all, money is essential for the survival of a human in this world.
1. Emerging from a Vicious Circle of Debt
Wage advance programs are important as they could potentially protect consumers form a life of debt if used wisely.
A wise man once said, “Money is not god, but not lesser than god either.”A person who took birth in this world is just a slave to the already prevailing demons. One such demon is money. Harsh, yes, but it’s the truth.
Paycheck-to-paycheck living, as opposed to having a nest egg, is what is mostly prevalent today. The only thing a person is concerned about is the next payday. Often before the next payday, people are left with a deficit in cash. Hence, they are left with no choice but to borrow money from the moneylenders. Charging interest that is a lot higher than usual is their common practice. Therefore borrowers are then unable to pay interest, resulting in a debt cycle.
In order to oppose the crisis, the idea of wage advance came into existence. Let’s throw some light on how one can benefit from wage advance services.
2. What are Pay Advance Services?
Pay advance services in Australia allow a person to get a part of their wages before their next payday. It can be accessed through pay advance apps or a portal. They provide a person with a cash advance in the hour of need.
The funds are directly transferred to your bank account instantly. Once you have your advance pay, the money gets automatically deducted from your bank account. This helps you keep credit checks easily. On your next pay advance, a nominal fee is charged to you. This ends the high rate of interest charged by traditional moneylenders.
The eligibility criteria for a pay advance depend upon the pay advance providers. Criteria might differ for different providers, but generally, it’s the minimum income. The number of providers is increasing day by day. This facilitates a person to compare the policies of different providers and find the best deal directly from the comfort of their home. Now getting credit is just a few clicks away.
3. Managing Bank Account Made Easy
A pay advance also benefits an individual to manage their money transfers easily in the following ways.
3.1. Not so Difficult
The application process for the pay advance services is quick and easy. One can apply for the pay advance in just a few minutes and get instant approval. In comparison, a payday loan provider can take up to a day to process requests and additional time to access your pay.
In the hour of need, a pay advance is the most beneficial if you have to carry out immediate money transfers.
3.2. Minimal Fee
Pay advance services are probably the least-priced money transfer option out there. In most cases, not more than 5% is charged for using the service. Plus, most providers don’t charge any interest whatsoever.
Moreover, there are no hidden fees such as admin or late fees. It is also advised to read the fingerprints before applying for the pay advance services.
3.3. More Convenient than Others
The quick nature of the money makes funds readily available in the bank account at your disposal. It always comes handy when you have money in your bank account. It helps you manage any type of unexpected expenses that comes your way. This may include a medical emergency or supporting loved ones studying abroad.
3.4. A Short-Term Commitment Period
When you take loans, generally, they are bound to be paid within a year or two. But the pay advance services asks for no such commitments and is only concerned till your next payday. This saves you a lot. Especially you don’t have to pay the annual fee, establishment fee, and such additional fees charged by credit cards.
4. How do these Pay-on-Demand Apps Work?
Downloading a pay advance app is a basic requirement for pay-on-demand services. The only condition that it asks is for a person to be employed and to have a decent amount. Based on a person’s pay cheque, the app calculates the money that can be borrowed. The general steps to use any app are listed below.
- Registration– Asks for basic information like phone number and email.
- Approval– Calculates available withdrawal balance according to the income
- Withdrawal– withdrawal with just a text message highlighting advance transfer to the bank account.
- Pay Back– The advance amount gets automatically deducted along with a 5% fee.
The ease and flexibility are what make wage advance apps so special and efficient.
5. Different Types of Pay Advance Services
Three types of pay advance services are available in Australia.
- Third-party apps– These apps directly link to an individual’s bank account and charge a flat fee of 5%. A person can either get access to a fixed amount or a percentage of their earnings.
- Pay-on-Demand services for employers-These are taken care of by the payroll department of an organization, and they help with an automatic deduction from the salary.
- Pay-on-Demand services by banks-If the advance wage that you took is not repaid back to the bank, interest fees may be applied.
6. Popular Pay Advance Apps
There are several apps that provide wage advance services in Australia. Some of them are listed below.
- CommBank Advance pay– Advances are offered between $300-$5000, and a nominal fee is charged according to the advances taken.
- BeforePay– Advances up to $1000 dollars are offered at a fixed transaction fee of 5%.
- MyPayNow- About 25% advance of the paycheque is offered up to $1250. A nominal fee of 5% fee is charged.
- MyPayFast-A 25% advance of the paycheque is offered up to $350. A nominal fee of 5% fee is charged.
- InstaPay-50% advance of the paycheque is offered up to $250. A flat fee starting from $2 is charged.
- Earnd-A portion of the paycheque and a fee is agreed upon by the employer beforehand.
- PayActiv-An advance is offered up to $500. A nominal fee of 5% fee is charged per fortnight.
- WagePay-25% advance of the paycheque is offered. A flat fee of 5% fee is charged along with interest charges of 25% p.a.
- WageTap-An advance is offered up to $100. A nominal fee of 5% fee is charged.
- ZayZon– Advance is offered b/w $100 to $500. A flat fee of $5 is charged.
7. The Not-so-Good Side
As the popularity of wage advance apps increases, more and more people are getting involved with it. It should be understood that as popularity rises, so does the scams and cons. Some of the drawbacks of pay advance services in Australia are listed below.
7.1. Potential Abuse by Employers
The people in power might try to manipulate their customers by promoting many plans, occupying the mind of a person. In this way, they try to sell the plan that’s beneficial for them and not the potential customer. Thus a power imbalance can be created.
7.2. Long-term Financial Stability
If a person has to rely on pay advance apps every other day, then it means there isn’t any financial stability. Therefore, relying on wage advance apps is not a long-term solution. If you have to, then you should reconsider your financial resilience and depend lesser on accessing future income prematurely.
7.3. Limited Regulations and Potential for Malpractices
Being relatively new, there are fewer regulations for pay advance services offered. This can lead to the risk of excessive fees, unfair terms, and lack of transparency in wage advance programs. In this way, consumers can be charged more than they should be for their own hard-earned wages.
7.4. Effects on Income Inequality
The benefits of the pay advance service might vary depending on the income. This may further exclude the communities with low income, creating an even bigger social gap. This can further limit the financial benefits of the wage advance services to a select group only.
8. Impact on Individual and Economy
Wage advance has a significant impact on personal finance management and even the economy itself. It can change the life of an individual and even help them in their financial growth.
8.1. Personal Financial Management
Wage advance services ensure an efficient cash flow that can be maintained on a personal level. Moreover, it provides flexibility to an individual and helps them manage financial obligations and unexpected finances. This completely takes high rates of interest and late fees caused due to personal loans out of the equation. The wage advance program ensures budgeting and planning for future expenses too.
8.2. Better Management of Consumer Spending
The economic world works on the butterfly effect. Even small things lead to the biggest of changes. Once a person has early access to their pay, they can spend more on goods and services. This is due to more in-hand income. This, in turn, can help local businesses to grow. Furthermore, if the annual income of the local businesses increases, the whole economy is impacted in a positive way.
8.3. The Mental Health Aspect
Financial stress is nothing new in today’s fast-paced world. Of course, the financial problems don’t actually announce their arrival. Imagine bills are on our heads, and there is no cash in our hands. Consequently, our anxiety peaks at this point in time. Undoubtedly, wage advances can actually help to counter this as it provides immediate funds. As a result, improved mental well-being is an important part of wage advance too.
9. Improvements to Maximize the Benefits of Wage Advance
Considering the impacts of wage advances in Australia, stakeholders can improve its effectiveness and promote equal financial practice.
9.1. Empowering Financial Education
The stakeholders should tie up with financial institutions in order to provide financial education to the masses. Evidently, more financial literacy leads to better long-term financial planning and budgeting.
9.2. Transparency is the Key
The process to get a wage advance should be clear as a day. In fact, there should be no hidden fee, and the instructions should be written in easily understandable language. Certainly, this can make consumer decisions more efficient.
9.3. Handling Data Ethically
Sometimes the information provided by the consumer is sensitive. The provider’s first priority should be data security according to privacy laws. Unauthorized misuse should be completely prohibited.
9.4. Evaluation and Improvement
Data analysis is a very important tool in order to increase the effectiveness of wage advance programs. Moreover, user feedback should be taken regularly in order to ensure the sustainability of the demand and supply equation. These methods can enhance customer experiences and address everyday challenges.
Conclusion
Looking at all the discussions, a simple conclusion can be made. A wage advance program is indeed an efficient way to manage sudden expenses. Yet, for a long-term financial solution, nothing is better than educating yourself about finances. Having a part of your wage earlier than your paycheque is indeed a lucrative concept. But in some or the other way, it’s just another credit product.
Using it responsibly, in the end, falls in the consumer’s hands only. You could have all the credit in the world that you want. But if you do not know how to use it efficiently. Your financial problems are bound to never leave you, just like a loyal life partner.
