It is said that the greatest madness is to do the same things and expect different results. So, as we poke our heads around the door of the Covid pandemic and all of its consequences, some of us will be seeking to change.
For example, what of the millions who cannot wait for pay day to buy groceries, or tyres for their car, or a skateboard, or alcohol? Before they might have considered placing a gripless shoe onto a slippery slope, seeking assistance from the devils in payday loan clothing. Now they may have a better choice.
Revolut, the London-based 21st century bank which boasts 16 million global customers, three and a half million of who enjoy a UK postcode, offers digital payment and banking services. More specifically, it has launched a ‘salary advance scheme’ which will enable workers to draw as much as half of their salary as they earn it weeks before payday. You will need to be a customer of the bank (fair), and Revolut will charge a flat fee of £1.50 every time a user accesses the pay they have accrued throughout the month, up to a limit of 50 per cent earned the day after each new pay cycle begins (a little controlling).
Is this the perfect solution for those of us who cannot manage our finances, even on a monthly basis? Or is it another version of ‘payday loan horror’, as described by many of the red-top papers?
Not entirely surprisingly, Revolut are in favour of its scheme, saying it will help alleviate the financial strain some consumers face between paydays. Some of those less biased have concerns that frequent use of salary-on-demand schemes, which at present are unregulated in the UK, can leave wage earners with a shortfall at the end of each month. There are also worries that the fixed charges levied for each transaction are akin to high interest rates for customers who repeatedly draw forward their pay.
How is the scheme so very different to the option of sticking a payment, as it arises, on a credit card and paying the balance off when money falls into your account? The number of British people who pay off their credit cards in full each month rose to 35.1 per cent in 2020. Or, to put it another way, 64.9 per cent don’t.
Revolut’s scheme offers an alternative. But is it offering it to those who cannot manage their monthly finances? Sara Williams, the Debt Camel lady, described salary advance schemes as debt “in disguise”. She said: “I worry we’re going to see people whose pay packets are reduced every month so they have to keep reborrowing.”
Thanks Sara, but do you have an alternative to accumulating debt for some of the poorest of our compatriots? Revolut are offering one.