Pay on demand lets you access money from your pay cheque early and should only be used in emergencies.
While you won't pay interest, you'll pay a fee to access money early that would be yours anyway.
If you're not really careful, you could end up out of sync with your own pay and rely more heavily on these services.
How do pay on demand and pay advance services work?
If you're running low on funds before your next pay day, pay on demand services allow you to access a portion of your pay early.
They are usually app-based loan products or sometimes similar services can be offered through your bank.
These loans are automatically repaid once your employer pays you, but the pay on demand service will take a fee.
In the case of most of these platforms, the process will look something like this:
Download the app and create an account
Request your money
Receive it instantly for a fee (either flat or percentage-based)
Repay automatically when you receive your pay cheque
Their intended use is basically anything that an interest-free buy now pay later service would be unable to cover. If repaid in full and on time, this type of finance is significantly cheaper than traditional payday loans, but you should still exercise caution.
⚠️ Warning about Borrowing
Do you really need a loan today?*
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor
Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94
The Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.
* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.
Features of pay advance services
You may find the following features with pay on demand services:
Loan amount. You can generally borrow between $100 and $1,250 using pay on demand.
Minimum income requirement. You'll likely have to provide proof of a minimum income to be eligible.
Repay automatically. Many providers link to your bank account for automatic repayments.
Quick access to funds. Employer-offered services and pay on demand apps usually take 2 business days before you will see the money in your account. Bank-offered services could see money in your account instantly.
Additional costs may apply. If you fail to repay your loan/prepaid salary on the allocated day, you may be charged additional fees or interest.
Short repayment times. Repayment times are less than 1 month (by your next payday).
Types of pay on demand services available in Australia
There are 3 main types of pay on demand services available in Australia. These include:
Pay on demand apps. Pay on demand apps are non-bank providers that charge you a fee to access money ahead of your payday, without involving your employer. These apps generally charge the maximum one-time fee of 5% to use their services, but do not charge interest. Pay advance providers usually do not perform credit checks.
Employer-offered services. Employer-offered services (e.g. InstaPay by Employment Hero) are pay on demand services that are offered by your employer, but are coordinated by a payroll provider via a third-party app. This type of pay advance service gives employees access to the money they earn as they earn it, rather than making them wait until their standard payday. Because third-party app providers charge employers to use their services, these are generally the lowest cost options for employees. Payments take 2 business days to clear into your account.
Bank-offered services. Bank-offered services (e.g. Commbank's AdvancePay) are provided by authorised deposit-taking institutions (ADIs). These services can be accessed instantly via your mobile banking app. If you don't make payment in full by the nominated date, you may need to pay interest on the outstanding amount.
Is pay on demand a loan?
Pay advance apps don't charge interest and you're technically gaining access to money you already earned. So is it a loan if it's your own money being advanced to you?
Part of the appeal of pay on demand is that it's presented as an alternative to existing lending options. While it is technically true you're asking for an advance on your own money, this money is not coming from your job or employer. The provider intervenes and provides it to you from their own financial reserves. They then charge a fee for it and deduct the amount owed from your next pay cheque. In essence, this means you've taken a loan.
This is important to keep in mind given how easy it is to access finance. A loan means money you have to pay back, no matter how easy it is to get the loan.
5 things to keep in mind when using pay on demand apps
If you decide a pay on demand service is right for you, here's what to keep in mind to find the best deal and avoid financial difficulties:
1. What fees are they charging me?
Depending on the provider, you may have to pay a fee per transaction. While interest is not charged, the service is usually not free. It may not seem like a lot, but these costs do add up, especially if you plan to use the service regularly.
To use an example, say you're asking for an advance of $500 from a standard pay on demand provider. With a 5% fee, you'll be paying an additional $25 in fees. If you use the service every month, you're paying $250 in fees in total every year. While this may seem manageable, keep in mind that these fees are being charged to access your own money and is not ideal for long-term use.
2. Short terms and budgeting difficulties.
Loan terms are generally short, with most providers offering a 31 day repayment term. Some lenders may provide terms up to 62 days at most. This means that you'll have about a month, or at most two, to repay the money. This repayment is automatically deducted from your next pay.
As you've taken part of your pay in advance, what's left for that month is your balance pay cheque. The following month, your pay will be minus the money you borrowed. You don't have the luxury of borrowing and paying the loan back incrementally.
This could create problems with your monthly budget. It's useful when there's an emergency - say, your dog got sick and you have to pay the vet. You get part of your pay in advance, but will that leave you short for the rest of the month?
You may also find yourself short the following month when the advance is deducted from your pay. This could throw your budget off kilter and potentially leave you out of pocket for a while. This is particularly a problem if you don't have enough savings to fall back on, or your disposable income isn't high. If you don't have the margin for a loan with a short term, you should reconsider.
3. Responsible lending.
Unlike traditional loans, including credit cards, pay on demand apps are not subject to responsible lending laws. The industry is largely self-regulated, leaving you with fewer legal protections compared to traditional loans. This can have several implications.
With your average loan, the lender is legally obliged to check your income, expenses and perform a credit check. They are only able to lend if you can repay the loan without creating a financial squeeze.
Pay on demand providers also check your income, but this is done to determine how much you earn, which in turn determines your credit limit. Without responsible lending laws, they aren't obliged to look into your expenses and ensure you can afford the loan. This doesn't mean they are in any way malicious or wish to create financial hardships, but it's up to you to ensure you can pay the loan back without difficulty.
In short, responsible lending laws allow you some protection, without them you will rely on the pay on demand product's internal processes.
4. Provider credibility
With different versions of pay on demand and pay advance services, it's important to choose one you can trust. Using one through your employer or your bank is a great way to know they are reputable.
Because of the above, pay on demand should only be used in emergencies and not become part of your regular budget. While it's better to save up a safety net, sometimes that's not possible and pay on demand could be a temporary solution.
Generally, how you apply for a pay on demand service will depend on the type of pay on demand service that you are opting for.
You may have to earn over a certain amount. For example, MyPayNow requires you to earn over $450 a week in order to qualify
You might not be eligible if you only receive Centrelink benefits
If you have irregular pay cycles, you may not be eligible
If you have major gambling habits, you may not be eligible
You must be employed
Your employer must be signed up to the program
You may have to earn over a certain amount
You may have to be a pre-existing member of the bank. For Commbank's AdvancePay, you must have a Commbank account that your salary goes into
A credit check might be required
Frequently asked questions about pay on demand
You do not need to have a good credit score to use most pay on demand services, as they do not often check your credit score. However, this may not be the case for all providers.
Repayment will be automatically taken on the day you are paid by your employer from your nominated bank account and/or directly from your salary.
Pay advance speed will depend on the service that you are using. Some services may be instant, but others may require 2 business days for payment to come through.
Bria Horne was a writer for Finder, with a specialist knowledge of personal loans, car loans and business loans. Originally from the UK, Bria has been a professional personal finance writer in Australia for over 2 years. She has an M.A and B.A in Philosophy and Literature from the University of Sussex, and previously worked on the UK’s leading hospitality publication. See full bio
How does pay on demand compare to a credit card and how much will it cost?
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