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Employee benefit linked to financial stress takes aim at traditional 401(K)s as US debt skyrockets
Americans are increasingly turning to services that are setting off alarm bells.
Instead of waiting for a traditional payday, workers are increasingly using apps like DailyPay, FlexWage, and Tapcheck to get paid the same day they work — sometimes just hours after clocking out.
It's called on-demand pay, and it's growing fast as millions of households face financial stress.
The service lets users withdraw wages they've already earned before their scheduled payday.
'It helps a lot of employees, especially ones in school who need to pay a bill while check isn't scheduled for another week,' one Reddit user said about DailyPay.
'But don't make it a habit — when you get paid in full, your check is little.'
These apps are marketed as an alternative to payday loans.
There's no interest, but workers typically pay a flat fee of $2 to $5 for instant access. Next-day deposits are often free.
The rise of on-demand pay comes as Americans face mounting financial pressure from nearly every direction.
Total household debt surged by $167 billion in the first quarter of 2025, reaching a record $18.2 trillion, according to the Federal Reserve Bank of New York.
Around $5 trillion of that debt is non-housing, consumer debt.
While credit card balances dipped slightly — falling $29 billion from the previous quarter — student loan debt jumped by $16 billion.
Delinquencies spiked after the end of a multi-year pause on repayment reporting.
Overall, 4.3 percent of household debt is now delinquent in some way.
That situation is especially dire for Americans living paycheck to paycheck.
Roughly one in three consumers struggle to manage their debt, and 35 percent say they can't pay all their bills on time, according to new survey data from digital finance firm Achieve.
America's labor market has shown surprising resilience - analysts were recently surprised with how many US employees got jobs last month
'When people are overwhelmed and about to miss bill payments, they often don't know what steps to take,' Brad Stroh, the firm's CEO said about the survey's findings.
The agency suggested consumers should avoid quick fixes to their debt problems like cash advances, saying they 'can deepen long-term financial challenges.'
'One significant concern with on-demand pay is the potential for high associated costs,' Austin Kilgore, an analyst at the Achieve Center for Consumer Insights, told
'The real danger emerges when individuals fall into a cycle of repeatedly accessing their wages early rather than managing their existing funds.
'This can lead to a situation where a significant portion of their income is consumed by fees, essentially preventing them from having full access to their earned money.'
But the problem doesn't seem to stem from American employment opportunities.
Early Thursday, the Labor Department released it's June jobs report that showed shocking resilience in the jobs market.
Last month, America added 147,000 jobs, up from 139,000 added in May.
Hidden in today's numbers was good news for debt-burdened Americans: the average wage is still increasing.
Last month, employers typically paid $36.30 an hour for work, an $0.08 hourly increase from the month before.
The positive numbers were shocking to many analysts, especially given the news on Wednesday.
