About half of American workers have received an unexpected financial expense each month for 12 months, overlapping most of the COVID-19 pandemic, with many resorting to bad checks or payday loans to cover costs.
Almost three-quarters (73.8%) said their largest unplanned bill during that time was $ 400 or more, and 19% said it was $ 800 or more, according to the data from the provider of access to wages earned, Immediate.
“What was probably even more surprising was the way some people paid this unexpected bill,” said Matt Pierce, founder and CEO of Immediate. “Twenty percent of people intentionally wrote a bad check. [overdrafted] because they had no money and another 25% took out a payday loan. This shows that American workers, who were already struggling before the crisis, have been hit hard enough financially by the pandemic. “
The study included two surveys, both conducted in November, to understand the financial situation of American workers and how employers are meeting their financial health needs. The Consumer Survey was conducted among 1,250 US employees and the Employer Survey was conducted among 200 companies.
Pierce noted that the adoption of Visa Direct, a near-instant way to transfer money, among Immediate’s user base, has been a measure of how desperate workers are to get money. money to help ease their cash flow problems. Immediately added Visa Direct as a faster payment option to its ACH transfer service last August. By the start of October, user adoption had fallen to about half of Immediate volume. At the end of January of this year, Pierce noted that 72% of his earned salary access requests go through Visa Direct.
“Legally we have to say we transfer money in minutes with Visa Direct, but in reality we see the money go by in about 12 seconds,” Pierce added. “When people see this speed of movement of money, it helps them move forward with their lives. “
A Federal Reserve Report released in May showed that before the pandemic, about two in five households (37%) would struggle to pay an unforeseen expense of $ 400. Of those who couldn’t pay the expense in cash told the Fed that 15% would use a credit card, 10% would borrow from a friend or family member, and 2% would defer payment until they have funds.
In contrast, the Immediate study found that 42% would use a credit card, 38% would borrow from a friend or family member, and 20% would defer payment until they had funds ( the question allowed a respondent to choose several sources). The increase in borrowing and deferrals can be interpreted as an increase in financial difficulties experienced during the COVID-19 crisis, which has fueled rising unemployment, children having to go to school remotely and rising costs. health care.
The study also found that more than a quarter (26%) of workers would delay or postpone medical treatment if they faced an unexpected cost for health care, even though doing so increased the chances of having a more expensive procedure in the future.
The study also found that there is a disconnect between how employers perceive the financial well-being of their employees and the reality of day-to-day life.
“We found that 94% of hospitality employers rated the financial well-being of their employees as good or excellent. I don’t understand how they can say that when COVID has closed over 100,000 restaurants and laid off all of those workers, ”Pierce said.