Americans spent $189 billionin fees and interest in one year. $189 billion.

The financially underserved—sixty-six million people with a lower income, ninety-one million with a credit score below six hundred, and sixty-three million who do not have a bank account—don’t see a better option.[1]

These Americans want to pay their bills on time, but the period between paychecks is often too long to make that possible. Due dates and paydays seldom line up perfectly, so people do what they can—they take on overdraft fees, utilities fees, payday loans, and other costs to fill the gap.

As employers, we can help close that gap by offering a form of on-demand pay called Earned Wage Access (EWA), available at no cost to us when we partner with PayActiv, the leading provider of EWA.

Why should we step in and offer on-demand pay? Because people need it:

178 million Americans—71 percent—say they are “coping” at best or feeling financially “vulnerable.”[2]

That’s one in four adults—over half of the nation’s workers—feeling so financially insecure they will take on high interest and fees to get by, even though that leaves them more susceptible to increased stress and lower productivity.

Americans spend almost $40 billion per year on single-payment credit products.[3]

Pawn fees, online payday loans, storefront payday loans, and other single-payment credit products are typically due in one lump sum, within a tight time frame. The loans are small—55 percent take out only $300 or less—but the interest grows quickly. That small sum can rapidly double or even triple, leaving the recipient further behind.

Americans spend over $25 billion per year on overdraft fees.

The biggest bite in fees and interest comes from overdraft fees. Out of the $40 billion spent on single-payment credit in 2018, over $25 billion went to overdraft fees.[4] Relentless overdraft fees—some banks charge them with every transaction—create a vicious cycle of debt. [5]

Americans spend almost $10 billion per year on installment loans.[6]

People take out installment loans to supplement mortgages, student loan debt, or auto loans. In 2018, use of installment loans rose 13.8 percent, suggesting a shift away from payday loans.[7] People may see installment loans as less risky, but they just as often leave workers stuck with higher payments.

Seventeen million Americans reported receiving a disconnection notice for an energy service in 2015.[8]

Utilities such as water and electricity are as necessary as shelter, food, and clothing. But about one in five households reported reducing or forgoing necessities just to pay an energy bill.[9] They have to because many utilities will cut off services for nonpayment, and most will charge a reconnect fee ranging from $15 to $150. Some will even charge a disconnect fee.

Nobody should have to make the choice between keeping the lights on or buying groceries, but seven million Americans have to do just that almost every month.[10]

About one-third of Americans run out of money before the next paycheck arrives.[11] It doesn’t have to be this way. By changing the timing of pay, we can help workers avoid fees and interest payments. It doesn’t take much—access to even $200 dollars a worker has already earned can provide relief.

Providing workers with on-demand access to their money through PayActiv alleviates the financial stress and vulnerability that workers too often feel by the end of each pay period.  PayActiv also helps them gain stable footing with a suite of financial wellness tools, including the PayActiv Visa Debit Card, which acts as a debit card for purchases and payments, as well as access to Uber, Amazon, and the RxDiscount program for prescriptions.. Budgeting and savings tools and financial counseling are available, too.

By acknowledging that the timing of pay matters, employers that provide on-demand pay ease workers’ financial stress and free them up to become more engaged and productive at work. They’ll also establish deeper connections with their employees, building lasting success for all.

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[1] Financially Underserved Market Size Study 2019, Financial Health Network (2019), p. 3, https://80e2e30d-0785-45cb-a346-08ebdc08f16b.usrfiles.com/ugd/80e2e3_48dcf89770e84ecda3eb05cfee00c0c8.pdf.

[2] Financially Underserved Market Size Study 2019, p. 4.

[3] Ibid, p. 8.

[4] Peter Smith, “Report: FDIC Data Shows That Banks Collected $11.45 Billion in Overdraft Fees in 2017,” Center for Responsible Lending, August 7, 2018, https://www.responsiblelending.org/media/report-fdic-data-shows-banks-collected-1145-billion-overdraft-fees-2017.

[5] Amanda Dixon, “Survey: Rising ATM and Overdraft Fees Leave Consumers Paying Much More Than They Did 20 Years Ago,” Bankrate, October 2, 2019, https://www.bankrate.com/banking/checking/checking-account-survey/.

[6] Financially Underserved Market Size Study 2019, p. 6.

[7] Ibid.

[8] “One in Three Households Faces a Challenge in Meeting Energy Needs,” U.S. Energy Information Administration, September 19, 2018, https://www.eia.gov/todayinenergy/detail.php?id=37072.

[9] “One in Three Households Faces a Challenge in Meeting Energy Needs.”

[10] Ibid.

[11] Megan Leonhardt, “Nearly 1 in 3 American Workers Run Out of Money Before Payday—Even Those Earning Over $100,000,” CNBC Make It, February 12, 2020, https://www.cnbc.com/2020/02/11/32-percent-of-workers-run-out-of-cash-before-payday.html?__source=sharebar%7Cfacebook&par=sharebar&fbclid=IwAR2JIKG0KHNmCSOEWftJliE1v7n2tCeDVroth15XC8QtZBZB8L3_BfnoV0k.