Inflation has people living paycheck to paycheck. Here’s how some banks are responding
By Alicia Wallace, CNN Business
“Payday Friday” may soon be replaced by “Payday Wednesday.”
This week, JPMorgan Chase, America’s largest bank, became the latest financial institution to offer customers early access to their direct deposits.
Chase, the consumer and commercial banking arm of JPMorgan Chase, announced that its 1.4 million Secure Banking customers will automatically receive access to certain direct deposits — such as paychecks, tax refunds, government benefits and pensions — up to two days earlier.
Offering access to critical direct deposits a day or two in advance could help customers — especially lower- or middle-income households who live paycheck to paycheck — pay their bills on time, avoid late fees and navigate unexpected expenses, said Ryan MacDonald, head of growth financial products for Chase.
“For them, the gap between when the check clears and when the bills are due is often a big issue,” he said. “To solve for that, we are looking to close that gap.”
Chase joins a growing list of fintechs and traditional financial institutions — including Chime, Current, Capital One and Wells Fargo — to offer customers early access to their money. Also, in the past year, several banks such as Bank of America, Citi and Chase have started scrapping overdraft fees.
Services such as early access to direct deposits and waiving of overdraft fees come at a time when historically high inflation is draining consumers’ excess savings, said Mark Hamrick, chief economist for Bankrate.
“At a time when prices have been high on a continuing basis, that has robbed consumers of purchasing power,” he said. “It means that every dollar that is in the bank is increasingly precious.”
The Federal Reserve has been enacting a series of massive rate hikes to curb rising prices. But in recent months, inflation has remained stubbornly high, spurring the Fed to continue its blunt approach and raise the risks of a sharper and more painful economic downturn.
“We’re in an environment where it’s broadly agreed that the risks of a recession are high,” Hamrick said. “That means that the risk of rising unemployment is also high. So if there’s an interruption in income, that means individuals are going to be facing increased financial stress.”
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