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5 Sep 2021

Revolut's salary advance feature can release 50% of your pay early - should you use it?

Users will have to pay £1.50 for each salary advance request

Revolut customers can get early access to up to 50% of their salary with its new salary advance feature, called Payday.

Those who use the feature won't have the move recorded on their credit report, as you will be accessing up to 50% of the money you've already earned but haven't received yet.

This comes following a recent launch of Borofree, an app that lets users get a salary advance of up to £300paid in vouchers.

Here, Which? explains what Revolut's salary advance feature offers and how to use it safely.

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How does Revolut's salary advance feature work?

If your employer is signed up to the scheme, the Payday feature can be used as part of the existing Revolut app.

You're allowed to withdraw up to 50% of what you've already earned, but haven't been paid yet.

So, for instance, if you've worked for 10 days of the month and want to draw down some of next month's salary, you'd be able withdraw up to five days' pay.

Employees are charged a flat fee of £1.50 per transaction, but the service is free for employers. The service is therefore more cost effective for those taking occasional larger chunks of money, compared with smaller, regular payments.

The feature can also be used for those who are paid weekly, four-weekly or on any other schedule. The maximum amount you can withdraw will remain at 50% of what you've earned.

The Payday feature allows you to see how much money you've earned since you were last paid and therefore how much you can potentially access early.

Why has Revolut launched Payday?

Revolut says this feature gives an interest-free option for people, so they don't have to turn to borrowing options such as credit cards or payday loans if they encounter an unexpected expense.

It also gives the option to change up how you budget; for instance, people who are usually paid monthly can choose to split their pay across the month, which may encourage them to keep their overall spending down.

Can my employer see my spending?

Your employer must agree to sign up to Revolut's Payday in order for you to use it.

Revolut's normal privacy settings mean employers can potentially have visibility over how often employees are using the service and how much of their salary they're withdrawing early. Employers can't access your bank account detailsor see what the money is being spent on.

Revolut says it's possible for employees to change their privacy settings to switch this off. In this case, employers would know that you're signed up to Payday, but wouldn't know how much you're using it.

Will it affect your credit score?

As the Payday early salary feature isn't a personal loan or other form of credit, it won't show up on your credit report and therefore won't affect your credit score.

However, Payday won't boost your credit score, either. Borrowing money that you later repay can provide credit agencies with proof of being able to repay credit, which can improve your score.

Should you access your salary early?

Providing the option to access the money you've earned earlier in the month could be a good way of avoiding using loans or credit cards that charge interest on what you borrow.

But there are potential downsides to accessing your salary early - it all depends on your circumstances and what you're using the money for.

If it's for one-off purchases or a way to break up your salary to help you stick to a budget, then you may find it helpful.

However, if you're using the money to spend more frivolously, perhaps to pay off interest-free 'buy now, pay later' (BNPL) debts on time, and it means you spend the cash before paying for things such as bills, rent and credit repayments, you could run into problems.

How to avoid a debt spiral

As is key with all kinds of spending, accessing your salary early needs to be done with care. As Revolut's feature doesn't report to any credit reference agencies, it means that other financial firms won't be aware of it if you apply for other kinds of credit.

If your budget isn't managed properly, it could have the potential for you to be given access to 'too much' credit - as companies providing the credit may do so on the assumption that you'll receive the entirety of your salary at the same time each month.

Those vulnerable to debt, or already in debt, could have their troubles exacerbated by spending a large proportion of their next pay cheque and being left short for the rest of the month.

How will Revolut protect customers?

Revolut's app does give you the opportunity to take control of your budget through its open banking technology, which allows you to link to your other bank accounts, and it also has budgeting and spending analysis features so you can see where your money is going.

Revolut also says it will be keeping track of how people use Payday. If people are withdrawing money too regularly, or displaying other behaviors that suggest vulnerability, it says it will step in and send nudges to let users know they're not using the service in a sustainable way.

If misuse continues, Revolut says that it will switch off or reduce the Payday service.