A New Way to Spend Your Paycheck Before You Get It

Two weeks can be a long wait for payday when you need $50 to buy a textbook for school or pay a utility bill.

But the wait for your paycheck could go away with Activehours, an app-based service that gives you a loan against your next paycheck, then deducts the amount from your checking account once your pay is direct-deposited there.

A company news release says:

Activehours is putting an end to the antiquated two-week pay cycle that is responsible for holding up over $1 trillion of pay each year while workers wait for payday. With the Activehours mobile app, hourly workers are able to unlock their unpaid wages right from their smartphones anytime they need it.

Activehours works on Android and iOS smartphones. It’s available to workers who are paid hourly, use an electronic timecard system and are paid via direct deposit. Users just have to provide their bank account information, Herb Weisbaum of NBC said.

When you need money, you send Activehours a screenshot of your time sheet, request a sum of money, then decide if you want to tip the app, and you’re done. If you request funds by 3 p.m. PT, you should receive the money the next business day. Then on payday, the amount you’ve advanced yourself through Activehours is withdrawn from your account, Weisbaum wrote. You can withdraw up to $100 per day.

Your employer doesn’t know anything about the transactions. The service is free, unless you choose to leave a tip. Weisbaum wrote:

“You decide what you want to pay, what you think is fair, and you could decide you don’t want to pay anything,” said Activehours founder Ram Palaniappan. “We have some people who tip consistently and we have some people who tip us every third, fourth or fifth transaction. So, we’re seeing some very interesting tipping patterns.”

This sounds like a much cheaper alternative to expensive payday loans. But, like any quick cash option, Activehours certainly has the potential to be abused.

Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, told NBC that overuse of Activehours could become a dangerous habit.

“Ten bucks feels cheap, and the person is so relieved to have the money that they are happy to be a big tipper,” she said. “It all sounds great — no fees, no interest charged, no mandatory payment on top of what’s borrowed — but this could snowball downhill quickly if the well-intended person, the one who thinks they’ll utilize it ‘just this once,’ continues to rely on this pay advance instead of probing to see what the real problem is and resolving it.”

Wouldn’t it be better to save up a little money each week until you have nice emergency fund?

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