Martin Lewis is warning debit card users to avoid overdrafts following a spike in interest rates.
The financial guru said overdrafts are now the most expensive way to borrow money with interest rates of 40 per cent – “double” that of high street credit cards.
An overdraft lets users borrow money despite an account having reached zero.
In the latest episode of The Martin Lewis Money Show Live, he said: “Most consumer overdrafts are now 40 percent, double a high street credit card, which means debit cards are now danger cards if you're overdrawn.”
Debit cards now have almost double interest rates than a high street credit card
Andrew Matthews
His advice for consumers is to use balance transfers to shift expensive debt onto a zero per cent interest credit card.
And those who are in real difficulty, should contact debt advice services such as StepChange.
He said: “Now the first thing if you're overdrawn is to check your eligibility for a zero per cent overdraft and to what amount.
“People also ask me, can I shift my overdraft on to a zero per cent card? The answer is yes, but only a few specialist cards. It's called a money transfer.
“With a money transfer card you apply for a new card and it pays the money into the bank account for you so you can get rid of your overdraft, you now owe the card.
“It's best for large overdrafts, you need a decent credit history.”
Lewis added that if people need to use an overdraft then they should schedule direct debits for just before payday.
However, those with multiple debts should list all their debt in order of interest rates, with the highest first.
Martin Lewis has issued advice for people using an overdraft
Tim Goode
He added: “Then you take all the spare cash you possibly have and you pay the highest interest rate ignoring the others.
“When this one goes, you then focus on clearing the next-highest interest rate.
“Once that goes, you clear the next and the next and so on. It's known as snowballing and it means you get rid of your debts more quickly.”
