We at Payactiv always take issue with the “experts” who claim that workers “don’t know how to budget”. We know that’s not true. We believe in America’s workers and their ability to budget and make the choices that are best for them and their families. 

Researcher Lisa Servon, in her book The Unbanking of America, writes, “What if, instead of focusing narrowly on people’s ‘poor choices’ … we worked harder to understand the options  available to people and the context in which they make those choices?” 

We couldn’t agree more. We know that workers’ choices are tied to the timing of pay, which is why we created earned wage access. It’s about lining up cash flow and expenses.  

Now we have more interesting data that supports what we’ve always said – when workers have money when they need it, they pay down debt and save. 

As millions of workers lost their jobs to the pandemic, there was a general expectation that they would run to credit sources to fill the gap. Instead, the opposite happened. Workers used cash flow from stimulus payments to pay down debt. 

The New York Federal Reserve’s Center for Microeconomic Data issues a quarterly report on household debt. In Q2, total household debt decreased by $34 billion (0.2%), the first decline in six years. Credit card balances declined $76 billion, the steepest decline ever recorded. 

The large pawnshop chains saw 50-60% declines in new loans. “We probably did more redemptions in the last four months than any previous four months we’ve been in business,” said Raymond Erario, co-owner of All Island Jewelry and Loan, a 25-year-old business in Centereach. 

KMBC in Kansas City reported, “We expected to see a huge influx of the loan business, but we really found that we didn’t have that business happening,” said Colin Crume, of Heartland Pawn.  After the first round of stimulus checks, people were lining up at their doors to pick their items up.” 

“It’s the stimulus,” said John Kinney, who manages one of the East Side locations of the Lev’s  Pawn Shop chain. “[And] a lot of people are getting more money on unemployment than they  were making before, so that’s allowed them to get their stuff out. They had money in their pocket like, ‘Well, let’s pay off some debt’”. 

Payday and installment lenders saw demand decline by nearly 50%. They all reported that stimulus payments and unemployment supplements were the reasons for the declines. 

When people have money – when they need it – they pay down debt. They also save. 

The JP Morgan Chase Institute shows checking account balances increased…and declined when the stimulus and unemployment supplements ended. 

This all relates to on-demand pay, because the stimulus and unemployment supplements are about fixing the cash flow misalignment in people’s lives, allowing people to pay expenses on time, eliminating reliance on expensive credit, and free up cash flow. That cash flow can be used to pay debt and save. 

When that excess cash flow goes away, so does the ability to pay debt and save.  

Earned wage access is what gives people the cash flow they need, when they need it, to pay debt and to save. 

Excess cash flow can also be spent on goods and services that enhance quality of life. Workers can adjust their diets to be healthier. They can deploy that cash flow to enhance skill sets. They can spend more money on their families in areas that may have been lacking. 

What is clear is that on-demand pay provides choice and flexibility for the American worker, and provide them with the opportunity to save and invest – choices they do not have without on demand pay. 

Payactiv is humbled and honored to be a part of your lives. We believe in you and in your choices.