Martin Lewis issued a new warning to everyone with a bank account overdraft on the latest episode of his Money Show Live TV programme. The financial guru focused on personal finance this week, a hot topic at the start of the new year as many households try to get back on track after the festive season.
Martin explained to ITV viewers how they could instantly start to reduce the amount of money they owe on a credit card by moving their debt to a zero per cent interest rate card, allowing them to pay back what they’ve borrowed faster. But he also busted one of the biggest myths about debit cards and explained why dipping into your overdraft could be more costly than paying off a credit card.
The consumer champion said: “Credit cards are horrible, debit cards are great - not true. If you’re overdrawn, your debit card is a debt card.”
Martin explained how most consumer overdrafts are now 40 per cent - double a high street credit card rate, which means you could be paying twice as much interest for using your overdraft as you would for using a typical credit card.
The founder of MoneySavingExpert.com warned: “Debit cards are danger cards if you’re overdrawn. Now, the first thing if you’re overdrawn is check your eligibility for a zero per cent overdraft and this applies even if you only dip in occasionally, this is still a priority for you.”
Martin highlighted how two banks are currently offering a zero per cent overdraft facility and have free eligibility calculators on their website.
Current account switch offers:
- First Direct: free £175 for new customers, £250 0% ongoing overdraft
- Nationwide: no free switching cash offer, overdraft is 0% for one year
He said: “Both these banks have eligibility calculators on their websites that tell you whether you’ll be accepted for their overdraft and roughly what amount." Martin also urged people to treat overdrafts like any other debt.
He explained: “I want you to repay it, so if you’re repaying £50 each month, if you’re £400 overdrawn at the start of this month you need to work so you’re £350 overdrawn at the start of next month, £300 the month after.”
Martin also encouraged everyone to try and shift their Direct Debits to just before pay day.
He explained: “These days all consumer overdrafts are based on interest rates, so the longer and the heavier you’re in debt, the bigger the interest charges. If you can move it towards the end of the month, you won’t be as heavily in debt for as long and should reduce the interest.”
The Martin Lewis Money Show Live airs on STV and ITV on Tuesday nights at 8pm.
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