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Ten tips to save money and reduce dependence on payday loans

[Oct 15, 2010.]


While the Community Financial Services Association of America (CFSA) promotes the use of instant payday loans when consumers face a financial emergency, the association recommends that payday loan borrowers create a savings account for future needs. In addition to having cash available for unexpected bills, consumers with a savings account use it to repay any outstanding payday loans and to build financial security.

Ten tips to reduce the need for instant payday loans

  1. Avoid check-cashing stores. If you pay a fee from $3 to $5 for each check you cash, you could be wasting $100 or more every year for fees. Open a checking account at a bank or a credit union to save these fees. Make sure you choose an account that has no monthly maintenance fees or minimum balance requirement.
  2. Open a savings account. A painless way to save is to set up an automatic transfer or direct deposit of a specific amount from each paycheck. Even if that is only $25 per paycheck, you could end up with $600 plus your interest earnings by the end of one year.
  3. Use a bonus or a raise to fund your savings account. If you earn extra money from overtime hours, an increase in pay or a bonus, deposit the additional income into a savings account.
  4. Pay yourself. If you have been making payments on a car loan or a credit card and have paid off, then make the same payment to your savings account every month rather than spending that "extra" money.
  5. Save your gift money. If your family gives you cash as a present, put part of it away into your savings account as a gift for your financial future.
  6. Pay your bills on time. Not only can you build a positive credit history this way, but you can also save some money by avoiding late fees and extra finance charges.
  7. Review your spending. Look for ways to spend less on things like eating in restaurants, cable television or buying coffee. Instead of spending $20 per week on coffee, put that $20 into your savings.
  8. Save your tax refund. Deposit a refund check directly into your savings account rather than spending it.
  9. Save your change. Keep putting your extra cash in a jar and then take it to the bank every month.
  10. Pay with cash. Studies show that consumers spend less when they use cash rather than a debit or credit card.

While none of these steps taken alone can prevent a financial emergency, the more you have in the bank, the less you need to rely on payday loans.


About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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