Payday Friday is increasingly coming one or two days early — on Wednesday or sometimes Thursday.
So are government benefits such as Social Security payments and other direct deposits.
It's not because employers or the government are moving the funds earlier. Rather, the shift is due to a growing number of banks and credit unions following in the footsteps of fintech platforms and advancing the money to customers' accounts before they actually receive the transfers.
Banks such as Wells Fargo, Huntington Bank, JPMorgan Chase and credit unions such as Affinity Plus and TruStone Financial are among the financial institutions that have rolled out early direct deposit services in Minnesota in the last year or so.
"Why not give consumers their money sooner?" said Dale Turner, CEO of Plymouth-based TruStone Financial Credit Union, the second-largest credit union in the state.
The reaction from its 210,000 members?
"I'll just say this: We haven't gotten any complaints," he said.
Each institution's program can vary. But generally speaking, there's no fee for the early direct deposit services and customers don't have to do anything extra to sign up for it as long as they have direct deposits set up to an eligible account.
Here's how it works: An employer or government agency typically sends a direct deposit a day or two — sometimes three days — before the designated payment date. It's then processed through the ACH (Automated Clearing House) Network, which handles electronic payments between financial institutions.
A direct deposit, added Jacquie Twedt, director of operations for St. Paul-based Affinity Plus, is a combination of two separate things — the file, which includes the amount and date it's to be paid, and the actual money.
"About 90 percent of the time, we receive that information at least a day ahead of when we receive the funds," she said. "So we have this information. And rather than just sitting on it, we're just posting it before we actually receive the settlement."
The settlement, which typically happens at 8:30 a.m. Eastern time on Friday for payrolls, is when the direct deposit money is actually transferred.
"Because payroll direct deposits are common and routine, some banks and credit unions feel comfortable advancing the funds before settlement," according to a spokesperson for Nacha, which governs the ACH Network, adding that banks use their own funds to do so.
Bank executives say there's little risk in the early direct deposits. Twedt noted there's a chance that an organization could send a reversal before the funds have transferred, but that hasn't happened since Affinity Plus rolled out its early pay service in May.
"The benefit to our nearly 250,000 members far outweighs that very minimal risk that comes with it," she added.
About 93% of American workers get paid by direct deposit, according to survey by the American Payroll Association.
Advancing the money is easy for Affinity Plus to get money in their hands faster, Twedt said. "It offers them a little bit more flexibility," she said. "There's been plenty of studies to show that when people can have early access to their money, they will avoid things like predatory payday lenders."
Twedt added that the service goes hand in hand with other changes many financial institutions like hers have been making such as reducing or eliminating overdraft fees.
Early direct deposit services were pioneered by so-called neobanks such as Chime and Current, which operate online and don't have physical locations. Now larger, more traditional banking institutions are following their lead, said Greg McBride, chief financial analyst for Bankrate.com.
It's similar to how many banks have also been paring back overdraft fees after these fintech platforms first starting doing so, he added.
"Their target market is a younger, tech-savvy consumer, many of whom are living paycheck to paycheck, trying to get settled into a new career and money is tight," he said of the fintech operators.
At the same time, there's also been a proliferation of services and apps such as DailyPay, Branch, Even and PayActiv, often offered though an employer and often including a small fee, that allow workers to get paid daily.
When it come to early direct deposits, McBride pointed out that people need to keep in mind that they still have to stretch the same paycheck amount.
"If you start using that money two days earlier, you're going to be in the same boat next pay period," he said. "But for somebody who's in a pinch, if payday just kind of falls at the wrong time after the rent is due instead of before the rent is due, it could make a big difference."
These services are also gaining steam, he noted, at a time of high inflation, which has been straining many household budgets.
When Wells Fargo first announced its "Early Pay" service last year, the bank noted that giving customers access to their direct deposits earlier would minimize the potential of incurring overdraft fees.
The program rolled out to Wells Fargo's customers in Minnesota in mid-December.
"We hear a lot from customers that are dependent on things like Social Security payments, as an example, of how being able to get these payments earlier is helping them understand a little bit of a better picture in terms of what they're working with each month," said Joe Ravens, the Twin Cities-based regional banking director for Wells Fargo. "It's also taking some of the strain off of them where they have maybe tighter deadlines to make payments."
The service has been a pleasant but unexpected surprise for many Wells Fargo customers, he added. After receiving a couple of early deposits in a row, some confused customers have come into branches to ask why it was happening.
"Then they'll come in and say, "Hey, is this normal?' Or, 'Can you explain it?'" he said. "Then they're obviously really excited about it."
There have also been some unanticipated benefits in Minnesota, such as customers being able to access their funds earlier in the week before Christmas when a severe winter storm barreled through the state.
"We heard from a lot of customers that getting that first wave early a few days sooner made their holidays better," Ravens said.
Since it rolled out its "TruPayday" service in June, TruStone Financial has been aggressively marketing it through TV and billboard ads.
Turner, its CEO, says the credit union has seen a 5% growth in the number of members receiving direct deposits since then. He also thinks it's one of several factors that led to the credit union's 5% growth in membership last year.
Still, Turner said the credit union will walk away from an estimated $600,000 in income this year, the amount it could have made from investing those funds instead of advancing them to customers, who then are able to receive a couple more days' interest on their money.
"But we felt that it was more important to win the trust of our members and have a better financial experience," he said.
