Will same-day pay help hourly workers and their employers?

Waiting between paychecks can be a big source of stress for people with bills to pay and no money to spare. Now a startup has launched a payment service that purports to better meet the needs of a huge number of Americans living paycheck to paycheck. The startup, called Instant Financial, allows employees to get half of their daily wages on the same day that they earn them, according to USA Today. Users can withdraw 50 percent of their paycheck on a given day, one hour after they finish work. The service sets these limits, according to the article, in order to prevent impulse spending and promote saving. Businesses pay $1 per active user each month to use Instant Financial. The Instant Financial FAQ indicates that unlike a payday loan — small, high-interest loans targeted at low-income earners — there is no interest charged. The Instant Financial service merely gives people money they've already earned, which is then taken off their next paycheck. USA Today reports that about 150,000 workers at 50 companies, including franchisees of Dunkin’ Donuts, McDonald’s, Outback Steakhouse as well as other foodservice, hospitality and retail businesses, have used the service to date. Employers told USA Today that they have seen reduced employee turnover since implementing the service. The service could help cash-strapped workers avoid payday loans to cover bills or food purchases between paychecks that often leads to snowballing debt. Payday loans have a notoriously bad reputation. Most payday borrowers pay more in fees than they receive from the loan, spending an average $520 to borrow $375. Such loans, recently described as "debt trap products" in an article on Marketplace, are now facing reform. New federal laws pertaining to payday loans have been finalized and will take effect 21 months after they appear on the federal register. The new laws prohibit automated withdrawal of money from borrowers' accounts for debt repayment and change the type of deal structures allowed. While Instant Financial is aimed at hourly workers, a CareerBuilder study found that 78 percent of Americans live from paycheck to paycheck, including nearly 10 percent of those making more than $100,000.

• Pay: New service allows U.S. workers to get paid daily instead of weekly – USA Today
• Most Americans live paycheck-to-paycheck – CNBC
• Frequently Asked Question – Instant Financial
• Payday loan business facing tougher rules – Marketplace
• Payday Loan Facts and the CFPB’s Impact – The Pew Charitable Trusts