Financial Experts: 4 Reasons You Should Be Getting Your Paycheck Early
Written by
Vance Cariaga
Edited by
Nick Friedman
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In many ways, gone are the days of paper checks as direct-deposit services provide most of your paycheck or payroll needs. However, even with online banking, it can be hard to tell if your cash is hitting your account as quickly as you need it to.
Today, dozens of financial companies let you get your paycheck early, ranging from major financial institutions like Chase or Wells Fargo Bank to mobile app payment platforms like Cash App, which makes paycheck deposits available as soon as two days earlier from the employer.
Here’s a closer look at why you should consider switching to a bank with this paycheck perk.
Quick Take: Getting Your Paycheck Early
Having access to your earnings before the official pay date has numerous advantages — with the most obvious being that you don’t have to wait several business days for your money.
This is especially important for people living paycheck to paycheck, but even workers in a strong financial position can benefit from an early paycheck. Here are a few key takeaways:
- If set up direct deposit with your bank, credit union or payment platform and connect your account to your employer’s bank account the net pay from your employer’s bank is then deposited directly into your account through the automated clearing house (ACH), so you don’t have to wait on a paycheck.
- Some banks now can have your paycheck deposited and set up to two days early in your account.
- If you use Cash App, the Cash Card or prepaid debit card installed on your phone works like a checking account, with no monthly service fees or overdraft fees and FDIC backing from Cash App’s partner banks.
If you’re thinking about getting your paycheck early through direct deposit, here are four reasons it’s a good idea.
It Can Help You Pay Your Bills on Time
When your budget is almost as tight as your pay period and bills are stacking up, getting paid early might make the difference between paying bills on time and paying them late.
Late payments often bring penalties and can even cause service interruptions, depending on the company. This might be the case even if you are only a couple of days behind on your payment.
With early paycheck deposit, you can avoid those problems or other potential hidden fees for later payments.
Beyond that, paying your bills early or on time keeps you in the good graces of lenders, landlords, utility companies, service providers and others who provide essential goods and services. You might even enjoy additional perks for building up a record of paying your bills on time.
You Can Avoid Overdrafts
It’s never a good idea to make a payment if you don’t have enough money in the account to cover it, because you’ll face overdraft and non-sufficient funds (NSF) charges that can add up in a hurry.
Overdraft fees happen when debits to your account cause your balance to go into negative territory. An overdraft might happen without your knowledge if you are hit with an unexpected charge. Overdraft fees also average around $34 but vary by bank or credit union.
Getting your paycheck sooner through early paycheck deposits can help you avoid overdrafts.
“We know that overdrafts can often occur a few days before payday, as funds run lower, and consumers may face an unexpected bill that could lead to an overdrawn account,” said Chris Starr, Head of Consumer and Small Business Deposits at Wells Fargo.
“Early access to funds helps customers avoid overdraft situations or using a credit card or payday loan because they ran out of cash early.”
To set up direct deposit with your account all you need is your bank’s routing number and the account number for where you want your paycheck to go. It’s an easy way to pad your account earlier to help avoid withdrawing funds that aren’t there.
You Can Earn Additional Interest
When it comes to saving money, every little bit counts. Getting your paycheck early through direct deposit services like those offered by Cash App means you can put money into your savings account earlier, giving you a couple of extra days of interest.
Over time, this can have a big impact. For example, if you get paid every two weeks, that means you get paid 26 times a year. If you get paid two days early every pay cycle, that adds up to 52 extra savings days a year and your money will earn interest.
This is especially impactful now, with interest rates high and some high-yield savings accounts paying annual percentage yields of 5.0% APY or more.
It Helps You Maintain Strong Credit
Getting your paycheck a couple of days early can have a positive impact on your credit score by letting you pay credit cards and other debts on time, which is a key part of your overall score. In the FICO score, for example, payment history accounts for 35% of your score’s makeup.
Payment history basically tracks your record of paying debts on time. Whenever you make a late payment, it dings your credit score. Getting your paycheck early can help prevent that.
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