I can’t survive until payday!

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Uh! I spent all my money this month and don’t think I can cope until payday … what should I do?

If there’s a time when you might run out of cash before the month is up, it’s January.

No matter how hard you try to limit your spending, the double whammy of Christmas and New Years always seems to cost more than you expected.

Many employers are kind enough to pay their December wages a week earlier – which might sound like a good idea at the time, but it means your pay is even less likely to stretch until next month.

All of this is great news for banks: cash-strapped customers equate to overdrafts, and overdrafts equate to fees and charges.

It’s your job to pay as little as possible for the extra money you need to get you through February. Here’s how:

1. Determine how much you need to troubleshoot yourself.

Take a look at your bank statement and think about how much extra you need to spend by payday.

Don’t forget any bills or direct debits that might be due this month.

This should give you an idea of ​​whether you are going to go into the red or not. Adopt this goal for budgeting.

2. Know your authorized overdraft limit

Generally speaking, your bank is happy that you are overdrawn as much as you want, as long as it is not tens of thousands of pounds.

But the amount you will be charged for the lien depends on what part or your authorized overdraft and what is not.

Within the limit of your authorized overdraft – which will likely be between £ 250 and £ 2,000 – you’ll pay a lower interest rate (in some cases none) and lower or no fees.

Once this limit is exceeded, the interest charges increase and, more importantly, the charges also increase.

Check your statement or call your bank and ask what your limit is.

3. Find out the cost of an overdraft

With the excessive banking penalties in the spotlight in recent years, many banks have changed the way they bill customers who fall into the red.

Until last year, most banks imposed a one-off fee, normally between £ 20 and £ 40, when you exceeded your overdraft limit, with additional charges whenever another payment was made on your behalf.

Now, account providers are more likely to charge lower daily fees (sometimes even if you are in your authorized area). Overall, those who briefly dip into their overdrafts every now and then will pay less, but those who spend a lot of time in the open without authorization might find themselves in a worse situation than before.

Halifax, for example, now charges a daily overdraft fee of £ 1 (allowed) and £ 5 (unauthorized). However, there is no one-time fee for honoring checks or standing orders.

Interest rates on overdrafts, authorized and unauthorized, are relatively high – typically 10-30%. But if you’re only overdrawn by a few hundred dollars for a few days, the interest charges won’t be huge.

Some providers, such as Alliance & Leicester, offer interest-free authorized overdrafts up to £ 2,000, but significant penalties remain for exceeding your authorized limit. However, you get £ 100 just for opening an account which might help a bit.

If you are an HSBC customer, you will not be subject to an unauthorized overdraft fee of £ 25 if this is the first time you exceed your limit in the past six months.

4. Talk to your bank

If you think you may be forced to exceed your authorized overdraft limit and pay additional fees, contact your bank first and explain your situation.

You may be able to agree to a temporary extension of your authorized limit to accompany you until the end of the month.

Banks will probably be more understanding if you can convince them that your overspending isn’t likely to happen on a monthly basis. But, if you try this, let us know what kind of response you get and if you think you’ve been heard fairly.

Other alternatives

If you expect to be charged too much for an overdraft, or if your bank won’t give you an overdraft, there are alternatives.

Putting some of your extra expenses on a credit card could be relatively cheap as long as you can pay off all the debts you’ve incurred when you get your next statement.

Otherwise, interest charges could continue to rise. Whatever you do, don’t take any money off your credit card – the fees and interest for doing so are usually extremely high.

A personal loan is another option as long as you can arrange one on time, but if you only need the money for a few weeks, it may seem unnecessary to borrow money – and pay interest. – for a year or more. Plus, it’s hard to borrow less than £ 1,000 this way.

Payday loans are very short term personal loans designed to bridge the gap until your payday arrives. The interest charged on this type of credit seems stratospheric, with APRs of 2,000% or more not uncommon.

But the fact that the loans only last for a week or two means that the interest you actually pay may not be that high – for example, you can borrow £ 100 for a week and pay back £ 110 to £ 130.

It may not seem so bad: but if you are not able to repay the loan on time, the additional interest and administrative costs will add up at an astonishing rate – so the safest way is to avoid it altogether. payday loans.

Finally, if you’re having trouble getting credit – or before applying for a new loan or credit card – it’s a good idea to check your credit report. This will let you know if there are any mistakes or issues that could put off potential lenders. You can get a free report here at lovemoney.com.

Compare credit cards at lovemoney.com

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