If you ever find yourself eking out one last £10 note in the final days before payday, never think you are alone. According to a YouGov report, almost half of workers struggle to make it from one payday to the next.
And it’s particularly difficult in January. Christmas and New Year always ends up costing more than most people expect. And some companies, in a strange act of misguided generosity, will pay you early in December in order to help you spend more than you should in the run up to the big day. So, chances are, right now you are wondering how to make it through the last few days of January. The good news is that there are plenty of options. The bad, that you need to pick carefully if you want to avoid saddling yourself with a hefty debt burden.
The cheapest thing to do is batten down the hatches, raid the back of your cupboards and get through the next few days without spending any money. As long as you’ve got enough money for travelling to and from work and no bills or unavoidable social commitments, this isn’t too tricky. A touch depressing perhaps but, bite the bullet now and at least you won’t have to start February by paying for January.
Use your overdraft
If you have to borrow some money then one of the cheapest ways to do it is via an authorised overdraft. But, before you start spending money that isn’t yours, check how much you are going to be charged for the privilege. Find out your authorised overdraft limit and how much interest you will pay if you dip into it. The cheapest out there is 0% with Alliance & Leicester’s Premier Direct Current Account – although this rises to 50p a day capped at £5 a month after the first year.
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Be aware that if you go beyond your authorised overdraft, you will be clobbered by bank charges – anything from a one off £30 charge, to £5 a day until the debt is repaid. So avoid going beyond your limit. If you know you are going to do so, call your bank. If you explain the situation and that it is a one-off, they may agree to temporarily extend your limit so you can avoid the penalty charges.
Free money from your credit card
A credit card can be a handy way to fund those final purchases before payday. As long as you clear the balance on your card when you get your next statement, you won’t pay any interest on it – making it a free loan. Just don’t take cash out – companies charge a high rate of interest on cash advances from the moment the money is in your hands.
Avoid payday loans at all costs
Companies offering easy access to money to tide you over to payday are springing up around the country. Already long-established in America, these “payday loans” are a very expensive way of bridging the gap before your next pay cheque.
The latest version of payday loans are ‘text loans’. You send a firm a text saying you need money and they loan you anything from £100 to £750 for up to 31 days, in an instant. TxtLoan claim that they can put the cleared funds in your bank account in minutes. But this is a very expensive and inadvisable way to lay your hands on some cash. TxtLoan charge £10 for a seven-day loan of £100. £10 might not sound like much compared to the cost of going into an unauthorised overdraft but it equates to an APR of 994%, and if you don’t pay the loan back after seven days the charges quickly rack up. If you are two weeks late, the debt will have risen to £200 for example. Similar schemes operated by Wonga.com and Cash Genie are even more expensive, with typical APR rates of 2,689% and 2,339% respectively and similar late payment charging structures. This is one form of loan you definitely want to avoid.
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