The contents provided on this page are for informational purposes only and do not constitute financial advice. Consider your personal circumstances and objectives before making any financial decisions.
In today’s fast-paced world you might find it becoming more and more challenging to manage your finances, particularly with unexpected expenses.
A pay advance service is one tool that could help ease the financial stress of unexpected expenses by providing fast and affordable access to funds when you need it. It also unlocks the added flexibility of being able to send and boost your money transfers to loved ones when you need to.
Let’s take a look at what pay advances are and how they can help you manage your finances, particularly when it comes to money transfers.
What is a pay advance?
A pay advance is a short-term loan that lets you borrow money quickly before your next payday. The funds are typically transferred directly into your bank account.
Depending on your provider, you then arrange to automatically repay the amount you borrowed, plus a transaction fee, the next time you’re paid. This means shorter repayment periods (aligned with your pay cycle).
According to moneysmart.gov.au, pay advances can also be known as pay-on-demand or wage advance services.
How much you can borrow through pay advance services generally depends on the provider and their eligibility screening processes, which look at factors such as your income.
A pay advance is not a long-term solution, but it might provide immediate relief to help manage various financial needs and emergencies.
In the case of money transfers, a pay advance is a quick and easy way to access extra funds without waiting for payday that could help you:
- Send money to loved ones who need it when you don’t have funds readily available, or
- Top up your money transfer so you can send more while keeping your debt manageable.
Let’s look at some features of pay advance services to see how they might be able to help you manage your money transfers.
How can a pay advance help you manage your money transfers?
Quick and easy
Applying for a pay advance is generally quick and easy, with most providers offering online applications.
Beforepay is an ethical pay advance service where the process from signing up to Cashing Out and having funds available to use could take as little as 10 minutes (subject to eligibility, T&Cs apply). They also have a custom assessment criteria that does not impact your credit score or history.
In comparison, a product like a payday loan does, and could take up to 24 hours for approval, plus several hours to access the funds in your account.
The speed of pay advance services gives you the flexibility to boost or send your money transfer when you need to, rather than waiting for payday or going through lengthy loan applications.
Low and simple fees
Using a pay advance to send or boost your money transfer may be more affordable than some other financial solutions.
Pay advance services generally don’t charge interest and only charge a transaction fee of up to 5% each time you use the service.
To Cash Out with Beforepay, for instance, you would pay a fixed 5% fee on the amount you borrow. If you were to do 10 Cash Outs of $200 each across 12 months (a total of $2000), the total fees you would pay is $100 (at $10 per Cash Out). So your total repayment would only ever be $2,100. There are no other costs involved like admin fees, late fees or interest, helping you avoid revolving debt.
To take out a payday loan of $2,000 over 12 months, you could be paying up to $1,360 in estimated fees and charges, bringing your total estimated repayment to $3,360! This example is based on the common fees charged by payday lenders, which are capped at a 20% establishment fee and a 4% monthly fee on the outstanding balance. Each payday lender will have its own fee structure, so make sure you read the fineprint.
Withdrawing cash using your credit card can also come with costly and complicated fees:
- Cash advance fees – can cost between 2% and 3.5% of your total transaction;
- Cash advance rate – charged daily on top of your cash advance fee and usually ranges between 19% p.a. and 25.99% p.a.
Pay advance services make funds readily available in your bank account to use when and where you need it.
This gives you a buffer to manage unexpected expenses in a timely manner and prevent them from accumulating and causing financial strain.
This can come in particularly handy when you need to send money overseas either due to financial obligations or emergencies, such as:
- Providing financial support for the medical expenses of a sick friend or family member.
- Supporting a loved one who is studying or working overseas.
- Preparing to live and work or study overseas yourself.
- Managing overseas properties and/or investments, like mortgage repayments for a home in another country.
No long-term commitment
Unlike other forms of loans, a pay advance is a short-term commitment. It’s typically due on your next payday, so you won’t be locked into long-term payments, interest charges or ongoing fees like annual fees that some credit cards charge.
With pay advance or pay-on-demand providers like Beforepay, you’re in control, so you only use the service (and pay the fees) when you absolutely need it.
How do you use a pay advance responsibly?
While a pay advance can be a useful tool, it’s important to remember to use it responsibly.
Here are some tips to ensure you use a pay advance effectively.
1. Only use it when you need it
To ensure you are spending smartly and responsibly, if you plan on using a pay advance, try to manage how and when you use it. A pay advance should only be used for unexpected expenses and emergencies, not for discretionary spending.
2. Don’t rely on it
Using a pay advance frequently could lead to a cycle of debt and financial instability. It’s important to consider creating a budget and savings plan to help manage your use and reliability of pay advances.
3. Borrow what you need
Only borrow what you need and can afford to pay back on your next payday. Borrowing more than you can handle might make repaying your loan difficult and could lead to additional financial stress.
Look for services like Beforepay that use custom assessment and eligibility criteria to determine a limit for you that is fair and responsible, designed to ensure you only borrow what is manageable for you.
A pay advance can be a helpful tool in managing your money transfers and avoiding financial stress. However, it’s essential to use it responsibly to keep on top of your finances. By borrowing only what you need and can afford to pay back, you can maintain financial stability and control.
This article was provided by Beforepay, Australia’s leading ethical Pay On Demand™ provider empowering Australians to take control of their finances.
Beforepay (ASX: B4P) is an Australian fintech founded in 2019 to provide working Australians who have not been well-served by the traditional financial services with an ethical, customer-friendly way to manage temporary cash-flow challenges.
Beforepay’s wage-advance product offers a simple, transparent and inexpensive fee model that gives customers total control. Unlike traditional products like credit cards and payday loans, Beforepay’s flagship product only charges a fixed fee of 5% for using the service, with no interest, late fees or other ongoing costs.
In a first-of-its-kind collaboration, Western Union consumers can borrow up to AUD $2,000 (subject to eligibility) through Beforepay to boost their international money transfers, with the flexibility to repay in multiple instalments. Find out how you can Cash Out for your online money transfer here.
The Beforepay app also includes free budgeting tools and spending insights to help customers stay in control of their finances.
For more information, visit www.beforepay.com.au