Living paycheck to paycheck isn’t easy. With little in extra funds to spare, living paycheck to paycheck can mean heavily relying on fees and interest charges to make up for whatever expenses need to get paid before your next paycheck. Moreover, a missed credit card payment or overdrafted account can severely damage your finances by forcing you into a vicious cycle of having to spend income to pay off fees and interest, only to find yourself once again in short of money for expenses and again having to rely on bank overdrafts and credit cards. It’s no wonder that banks charged Americans over $11.68 billion in overdraft fees and insufficient funds fees in 2019.
However, it is possible to get fees and interest charges refunded. In fact, we’ve helped many of our users get refunds of up to $2000. If you repeatedly incur fees and/or credit card interest because of overdrafts and/or unpaid credit card balances, consider reaching out to your bank to ask for refunds on those fees and/or interest charges. You can rely on the following template as a guide to what you should write to your bank:
Hello - could you please look into the fees on my account? As a loyal customer, it's sad to see these fees being charged to my account, especially in these harsh economic times for consumers. Please grant refunds for these fees. I made a list of fees so you can reference them easily [list out the largest fees on your account].
Replace “fees” with “interest charges” for credit card fee negotiations. You can sign up with Harvest Platform if you’d like to have the script automatically generated with all of your fees and interest charges.
Most major banks will refund up to $100 in fees per calendar year, sometimes more. Credit card companies will usually refund 2-3 of your latest credit card interest charges. You can also ask your credit card company to lower your APR, which can help save you a lot in credit card interest in the long run. While yearly fee and interest charge refunds won’t exactly amount to $50,000 in the long run, on an average refund basis of $150, that still means over $5000 refunded over 30 years. You can also eliminate fees altogether (average savings of $350 per year) by switching to a no-fee bank like Chime or Cash App.
According to Barrons, there’s nearly $100 billion in missing money. What is missing money? Missing money are funds that have yet to be claimed by their owner and are currently held by the state. It can come in the form of a tax refund that was never claimed, unclaimed dividends, and so on. To check if you currently have funds owned by you that you have yet to claim, visit missingmoney.com and do a quick search. All you need is your full name. A more comprehensive list can be found on unclaimed.org.
With interests now at record lows, now may be the time to refinance your mortgage, which over time may actually help you save up to $50,000 in interest. Of course, this depends on the size of your mortgage and the value of your home.
Consider this example of a 30 year mortgage:
At a reduced interest of 3.5%, the monthly payment on the mortgage becomes $1572, a savings of $201 per month or $72,360 over a 30 year period.
With refinancing, however, there are costs to take into consideration, such as appraisal fees, loan origination fees (here’s a more comprehensive list of the costs to do with mortgage refinancing), so do compare the potential savings of refinancing versus the costs of doing so. A good rule of thumb to follow is to refinance if the difference in the current interest rate on your mortgage and the refinanced interest rate is around 1%. For a simple way to refinance your mortgage, check out Better.
There are two ways to consolidate debt. Transfer all your debts to a 0% credit card or get a fixed rate debt consolidation loan, both of which require good credit. If you’re currently paying off large amounts of credit card debt, which can have interest rates of up to around 24%, a debt consolidation loan can be a good option. Let’s say you’re currently paying off $20,000 in credit card debt at an interest rate of 20% and your credit score is 730. You’re committed to a monthly payment of $500 and you have 10 years to pay off the debt.. At that credit score, based on rates quoted by NerdWallet, you may be eligible for a debt consolidation loan at an estimated APR of 13.9% - a savings of 6.1%. In terms of interest owed, with the debt consolidation loan at 13.9%, you end up paying $7021 in interest instead of $13,233, a savings of $6212 over the course of 10 years.
There are, however, costs involved with debt consolidation loans so just like with a mortgage refinancing, do compare the amount that you save from debt consolidation versus the amount it costs to consolidate.
Debt consolidation also temporarily affects your credit score in the short run (since you may be cancelling credit cards and closing other accounts) but as long as you make payments on time, the added benefits of being able to pay off your debts at a lower interest rate and at a faster rate will help raise your credit score in the long run.
Generally, you should try to refinance your student loans as soon as you have a stable job and income enough to cover your loans as well as your living expenses. The sooner you can refinance your loans at a lower interest rate, the better. As with any loan refinancing, shop around for the lowest interest rates and always be on the lookout for them. Just a 1% decrease in student loan interest on a $20K loan over 10 years can easily save you over $1000.
As for how to best manage the student loan repayment process, check out Pillar, a free app that helps you with the student loan repayment process.
No-fee banks like Chime and/or Cash App can offer a significant savings advantage if overdrafting is a regular concern. While no fee banks don’t have a physical presence, they do still provide services like the ability to deposit cash (through supported ATMs) and the ability to receive direct deposits.
Overdrafts aren’t really a supported feature for most no-fee banks, which can be an issue for individuals living paycheck to paycheck with little in extra funds to spare for emergency expenses. While they’re allowed to a certain extent (Chime, for instance, allows you to overdraft your account by $100 without penalty), you’re not allowed to overdraft by hundreds of dollars like you are with most major banks like Wells Fargo and Chase, which may mean that you won’t be able to overdraft to pay emergency expenses should they come up.
With this limitation though, at least you won’t find yourself accidentally overdrafting your bank account and subsequently falling into the vicious cycle of fees leading to more fees. To avoid this disadvantage to no fee banking, if you do find yourself having to pay off an emergency expense, use a credit card instead.
The 50/30/20 rule is a recommended approach to managing your finances. 50% of your income should go to necessities, 30% to wants, and the rest to savings and paying off debt. Following this rule can over time put you on a path to a large amount in savings. For example, let’s say you save 20% of $50,000 every year. Over time, say 20 years, that’s $200,000 saved.
You can easily lose track of subscriptions, especially ones that have a small monthly fee and appear to be a negligible expense at first. Have enough of those charged to your checking account and you might easily find yourself paying out $100-200 every month just on subscriptions alone. Subscriptions, if kept unchecked and unmonitored, can also lead to account overdrafts and slowly grow the balance on your credit card.
To find out what subscriptions you currently have on your account, check out our subscription management tool, which tracks recurring debits to your checking and credit card accounts.
It’s possible to get a lower APR on your credit card following an improvement in your credit score or a reduction in the prime rate. To obtain a lower APR, ask your credit card company and escalate your request to a supervisor to maximize your chances of getting a lower APR.
A lower APR can make a significant difference to your finances, especially if you have a large unpaid balance on your credit.
To give an example, let’s say you have a statement balance of $10,000 and your current APR is 24.99%. Your aim is to pay off the entire balance in 48 months.
At an APR of 24.99%, your monthly payment is $331.52.
At a reduced APR of 18.99%, your monthly payment becomes $298.95, a savings of $32.57 a month.
$32.57 saved per month over the course of 48 months is $1563.36.
To save that amount, all you have to do is reach out to your credit card company to ask for a lower APR. If your request is denied the first time round, keep trying periodically (we recommend that you try every 3 months).
Credit cards often offer reward points and perks, sometimes at the cost of an annual fee.
While those perks and reward points can seem enticing, in the long run, they may actually be the reason behind your overspending (check out this article by the Penny Hoarder). According to the article, this is because spending with a credit card is painless in the moment (you don’t have to hand over money immediately) and because accumulating points and cash-back rewards can feel rewarding in the moment and encourage even more spending. Sign up bonuses, for example, encourage large increases in spending (Chime estimates that increase to be between $3000-5000). So next time you’re hit with an attractive offer for a new credit card, think twice before signing up, especially if you already have several credit cards.
Paying down debt faster can help you save on interest in the long run, which is money saved that can be put to other uses.
However, this rule only applies when the interest on your debt is much greater than the potential return you can generate on money you’ll be using for payments.
A good rule of thumb to follow is to think about how much you think you’ll be able to earn on spare cash that you don’t use to pay off your debt. For example, if you currently have debt at an annual interest rate of 3% and a way to generate more than a 3% return on whatever spare funds you have, consider paying only the minimum amount required to still make progress on lowering your debt and dedicate the rest of your spare funds to earning a return greater than the extra interest you’ll be paying.
Want to know the bare minimum you should pay on your existing debts? Check out our debt management tool by signing up for a Harvest Platform account and linking your debt accounts!
Recouping $50,000 over time is not as challenging as it sounds. As with any good financial outcome, progress takes time and effort. While saving this much is not an overnight process, but with enough knowledge and action driven by that knowledge, it’s perfectly doable.
Harvest helps increase the net worth of the 99% through artificial intelligence and financial automation. To date, Harvest has refunded over $2M in bank fees and interest charges to its members with the ultimate goal of increasing the net worth of everyday Americans by $1 trillion by 2030. Our platform starts with providing immediate relief through bank fee and interest charge refunds, orients a member's financial health with our proprietary PRO Index™, and keeps track of net worth over time aided by our suite of financial tools. Check out our 8-step guide on "How to Build Wealth from Nothing" to get started on increasing your net worth.