Money Insider: An early Christmas payday can be a godsend but there are downsides


Andrew Hagger
Saturday 06 December 2014 01:00

The run up to Christmas is the most expensive time of the year for many of us, so it's a great help if your employer enters into the festive spirit and pays your December salary a week or two in advance.

This could be a godsend when faced with the cost of presents, festive food and drink and nights out celebrating with family and friends.

However the downside of getting paid that bit earlier means it's even easier to lose track of debit card transactions and direct debits, particularly when your next payday could be up to six weeks away.

Failing to keep tabs on your current account balance could mean you exceed your agreed overdraft limit and face a big bank charges bill come the first few weeks of 2015.

That's not the best way to kick off the New Year, particularly as you'll have the post-Christmas credit card bills to deal with, too.

If you don't already have an agreed overdraft in place or you think you could do with a little more financial breathing space over the festive period, speak to your bank or building society now, to arrange an authorised overdraft sufficient to see you through to the end of January.

It's usually a simple and pain-free process and can be arranged very quickly either online, by phone or face to face if you pop down to your local branch.

Once you've got your safety net arranged, make sure you keep a close eye on your balance – there's no excuse not to these days, with the information available 24/7 online, on your smartphone, tablet or via an ATM.

To emphasise the importance of staying within your agreed limit, I looked at how much it could cost you if your bank allows you to drift £200 over your limit, courtesy of two £100 debit card payments and your account remains overdrawn by this amount for seven days, until your January salary is received.

The numbers are too big to ignore, with customers of Lloyds Bank account facing a bill of £76, NatWest customers £48, Santander £42 and Halifax and Barclays £35 – so it's definitely worth being a little proactive and getting your finances organised.

One of the biggest problems people have with unauthorised overdraft charges is that there's no common policy among banks; some charge fees daily, some charge monthly, some do both and the level of charges varies widely. But whichever tariff you're signed up to, it can end up hitting your pocket hard.

Once Christmas is over and you know where you stand financially, it may be worth considering clearing your overdraft once and for all. For personal loans of £2,000 or £3,000 you'll find that high-street bank rates are well into double figures; however there are cheaper options: loans of £2,000 from Zopa and RateSetter are currently being charged at 7.8 per cent APR and 8.2 per cent APR respectively. Another option worth considering is the low rate credit card from MBNA, which charges a rate of 6.6 per cent APR but, unlike other plastic, enables you to transfer money from the card into your bank account and doesn't charge a fee for doing so.

It can prove a cost effective way of eradicating an expensive overdraft, as long as you are disciplined and pay down the card balance each month until it's cleared.

If you keep on top of your spending and stay within your agreed limit, then the charges you incur will be minimal, and at least you won't give the banks a chance to spoil your Christmas and New Year celebrations.

Andrew Hagger is an independent personal finance analyst from

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