I can't survive until payday!

Eeek! I've spent all my money this month and don't think I can cope until payday.... what shall I do?

If ever there's a time you are likely to run out of money before the end of the month, it's January.

No matter how hard you try to rein in spending, the double-whammy of Christmas and New Year always seems to cost more than expected.

Many employers are kind enough to pay their December salaries a week early - which might seem a nice idea at the time, but it means your pay is even less likely to stretch to next month.

All of this is great news for the banks: customers running out of money equals overdrafts, and overdrafts equal fees and charges.

It's your job to pay as little as possible for the extra cash you need to see you through to February. Here's how:

1. Work out how much you need to tide you over.

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

Don't forget about any bills or direct debits which might be due this month.

This should give you an idea of whether you're going to go into the red or not. Adopt this goal to draw up a budget.

2. Find out your authorised overdraft limit

Generally speaking, your bank is happy for you to go as overdrawn as you like, provided it's not by tens of thousands of pounds.

But how much you'll be charged for the privilege depends on what part or your overdraft is authorised, and what is unauthorised.

Within your authorised overdraft limit - which is likely to be somewhere between £250 and £2,000 - you will pay a lower rate of interest (in some cases, none at all) and lower or no charges.

Once this limit is breached, interest charges increase and, more importantly, so do fees.

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

3. Find out the cost of being overdrawn

With excessive bank penalties in the spotlight over the last few years, a lot of banks have changed the way they charge customers who go into the red.

Until last year, most banks would impose a one-off fee, normally between £20 and £40, when you breached your overdraft limit, with additional fees every time another payment was made on your behalf.

Now, account providers are more likely to impose smaller daily charges (sometimes even if you are within your authorised zone). On the whole, those who dip into their overdrafts briefly every now and then will pay less, but those who spend a lot of time overdrawn without authorisation could end up worse off than before.

Halifax, for example, now charges a daily overdrawn fee of £1 (authorised) and £5 (unauthorised). On the other hand, there are no one-off fees for honouring cheques or standing orders.

Interest rates on overdrafts, both authorised and unauthorised, are relatively high - typically from 10% to 30%. But if you're only overdrawn by a couple of hundred pounds for a few days, interest charges will not be huge.

Some providers, such as Alliance & Leicester offer interest-free authorised overdrafts, up to £2,000, but there are still substantial penalties for exceeding your authorised limit. However, you get £100 just for opening an account, which could help a bit.

If you are an HSBC customer, you won't face its £25 unauthorised overdraft charge if this is the first time you've gone over your limit in the past six months.

4. Talk to your bank

If you think you'll be forced to exceed your authorised overdraft limit and incur extra charges, contact your bank in advance and explain your situation.

You may be able to agree a temporary extension of your authorised limit to take you through to the end of the month.

Banks are likely to be more sympathetic if you can convince them your over-spending is not likely to be a monthly occurrence. But, if you try this, do let us know what sort of response you get and whether or not you feel you got a fair hearing.

Other alternatives

If you expect to get charged too much for going overdrawn, or if your bank won't give you an overdraft, there are alternatives.

Putting some of your extra spending on a credit card could be relatively cheap provided you can pay off all of the debt you run up when you get your next statement.

If not, interest charges could keep mounting. Whatever you do, don't withdraw cash from your credit card - the fees and interest charges for doing this are usually extremely high.

A personal loan is another option provided you can arrange one in time, but if you only need the cash for a couple of weeks, it might seem unnecessary to borrow money - and pay interest on it - for a year or more. Also, it is difficult to borrow less than £1,000 in this way.

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

But the fact that the loans are for just a week or two means that the interest you actually pay may not be that high - for example you could borrow £100 for a week and repay between £110 and £130.

That might not sound quite so bad: but if you are unable to repay the loan on time, the interest and extra admin fees will pile up at an astonishing rate - so the safest course is to steer clear of payday loans altogether.

Finally, if you struggle to get credit - or before you apply for any new loans or credit cards - it's a good idea to check your credit report. This will tell you whether there are any errors or issues which could put off potential lenders. You can get a free report right here at lovemoney.com.

Compare credit cards at lovemoney.com