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Are Pay Advance Services Safe

While recent years have been all about delaying payments with buy now pay later (BNPL) solutions, we are now seeing a surge of advance pay services that allow you to ‘borrow’ money before your next paycheque arrives.

🧐 These can be helpful if you are late on bills or struggling with the recent interest rate rises, but they do involve a fee and there are drawbacks if you can’t meet your other financial commitments.

Things to watch out for...

Regular withdrawals through advance pay services can add up to big fees – and essentially lost wages.
Many Australians struggling with debt can use advance pay to cover big bills – but always proceed with caution.
With almost one in three Australians not having a month’s worth of emergency savings, it’s important to get on top of bills and start building your savings.

What you need to know about advance pay services

It’s good to know what’s out there to support you financially, especially considering the rising cost of living and skyrocketing inflation.

But when it comes to advance pay services, it’s wise to proceed with caution.

Fees charged on advance pay services can be massive, with just a 5% charge on your weekly salary adding up to effectively 260% interest over the course of a year.
Debt is common in Australia, with a combined personal debt of $2 trillion. More importantly, 37% of those in debt struggle to pay it off.
Advance pay services can help out with one-off events like getting your car fixed for work, but be aware of the fees and how much you might be losing over time.

Be aware: Using advance pay services can hamper your savings goals.

Reasons you might want to use them...

Despite the risks, advance pay services may be able to help you plug cash gaps.

🔎 Just make sure you do your research on any service you plan to use.

While some advance pay solutions charge a flat fee (e.g. $5 per withdrawal), others charge a percentage, which can add up to eye-watering amounts on large transactions.
You could potentially pay a fee every time you use the service, so it’s not feasible to get payment advances every week. Save it for when you have an urgent bill to pay.
Remember all your obligations. While advance pay services have a limit on what they can charge you, if you miss your mortgage or personal loan repayments, that could result in much more costly consequences.

The bottom line

Advance pay services can help you cover big expenses using the money you’ve already earned – or will earn in the very near future. That means you don’t have to go further into debt to access your cash. But it still pays to be cautious.

😮 Advance pay services are currently unregulated, so tread carefully and don’t use any platforms that appear untrustworthy or have bad reviews.

👛 Rather than constantly paying fees for advance payments, see where else you can tighten the purse strings and start building up your emergency savings.

👓 Always read the fine print, as some services charge their fees on a sliding percentage scale. Only borrow what you need so you aren’t left out of pocket when your paycheque does arrive.

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