Martin Lewis has warned those of us with overdrafts that we need to think of them as debt. The money saving expert got serious on tonight's (Tuesday, November 15) Martin Lewis Money Show Live Christmas Special as he addressed the issue of having a bank account in the red.
"Overdrafts are dangerous debt. Most banks charge 40% interest on overdrafts," he declared, which is a figure which may shock many of us.
"This all changed with the regulatory change a few years ago. That [the interest] is double a high-street credit card."
In the warning, he revealed exactly how to treat overdraft debt - very seriously.
"So actually, if you have debt on a high-street credit card and debt on your overdraft, you should prioritise paying the overdraft and just paying the minimums on your credit card, which is counter-intuitive to many people, but that's what you need to do.
"Now, you can switch bank accounts if you're overdrawn. There's no guarantee they will match your overdraft but you are allowed to switch.
"What I would say to anyone who is overdrawn is... treat it like a debt."
Money Saving Expert says: "Overdrafts are a debt like any other, a fact brought into stark relief by most accounts having 40% interest rates – double those of most credit cards. If you're struggling, we've tips on how to pay less for your overdraft, and how to pay it off.
"Know how much you owe... and budget to pay it off.
"If you've got savings, use them to pay off your overdraft.
"Switch to a 0% overdraft.
"See if you can move the debt to a 0% credit card, or another bank.
"Talk to your bank to see if it can help you.
"Manage your way back into credit.
"If you've multiple debts, repay your most expensive first – this may be your overdraft.
"If you've paid your overdraft off and don't want to be tempted again, avoid the risk and cancel it."
Martin Lewis Money Show Live is on ITV1 at 8pm on Tuesdays, or you can catch up on ITV Hub
