Source: The Sun
HUNDREDS of thousands of public sector workers may soon be part of a scheme that allows them to access their salary as they earn it – rather than wait for payday.
Workers whose employers have already signed up to the scheme are given an app that shows them how much they have earned in real time and how much they can withdraw early.
Participating employers include David Lloyd Clubs, Camden Town Brewery and Key Security.
Wagestream, the firm behind the scheme, enables people to access their wages before payday and so avoid costly loans.
For example, imagine you earn £1,200 a month.
After a week, you’ll have earned about £300 – the exact amount depends on how many days in the month.
Wagestream will let you withdraw some or all of that.
Each transaction costs a flat fee of £1.75.
On payday at the end of the month you’ll then be paid £898.25 (£1,200 minus £300 and the £1.75 fee).
Technically this isn’t a loan; there’s no credit and no interest.
Instead, it’s early access to your own money for a small fee.
Employers decide what limit to place on withdrawals – to ensure workers will still have money coming into their accounts on payday.
Wagestream is in talks with NHS trusts, local authorities and the Army.
This means hundreds of thousands of public sector workers may soon get early access to their earned income.
It’s easy to see why Wagestream is more appealing than payday lenders.
Lots of high-cost short-term lenders offer loans at excessively high APRs to desperate borrowers.
For example, a 3-month £300 loan from Satsuma Loans costs £442.80.
Alternatively, a £300 advance on your salary costs £1.75.
There’s also no danger of not paying it back and having the loan cost spiral as the money is taken straight from your pay.
Alternatives to high-cost credit
IF you’re in serious money trouble then here are some alternative places where you can go to for help:
Credit Unions – These are small not-for-profit groups that help people save and borrow money, and you may be able to get a loan. You can find out which credit union you are eligible to join by searching here.
Ask for an advance – You can ask your employer to give you an advance on your wages, or the JobCentre Plus may be able to arrange a short-term advance on your first benefit payment.
Foodbanks – These organisations help provide emergency food and toiletries to see you through to payday. You can see if you qualify for your nearest branch here.
Check your benefits – Make sure that you are getting all the benefits that you are entitled to using this calculator from the charity Turn2us.
Freecyle/Facebook groups/Gumtree and eBay – You maybe able to find free or cheap second-hand furniture.
Boost your credit score – If you’re never rejected for credit then there are ways to show lenders that you can be responsible with your cash.
Will Berrington from debt charity Step Change said: “Developments which could allow people to have greater control over their finances and provide them with better alternatives to high cost credit, are always worth exploring.”
“This includes employers taking steps to improve staff financial wellbeing, perhaps in the form of salary advances.”
However, he warned: “Any form of borrowing needs to be considered carefully in terms of whether it is providing a genuine solution or simply masking a bigger problem.”
“For employers, one of the questions might be whether and when demand for such borrowing might call for intervention of a different kind such as signposting to free debt advice.”
This scheme is not the only change to help workers avoid high cost credit. A price cap on rent-to-own firms started in April after The Sun’s Stop The Credit Rip-Off campaign.
Meanwhile there is a worrying rise in the number of people payday and high-cost credit debts.