MARTIN Lewis has issued an urgent warning to anyone using their debit card and shared advice on how to avoid overpaying.
The money-saving expert explained that the annual interest rate on overdrafts now stands at 40 per cent-much higher than that compared to that of a typical credit card which is usually 18 per cent.
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Martin previously called overdrafts a “danger debt”, and warned viewers an overdraft is a wrong place to be carrying debt.
He told The Martin Lewis Money Show Live: “Most consumer overdrafts are now 40%, double a high street credit card, which means debit cards are now danger cards if you’re overdrawn.”
The money expert suggested switching expensive debts onto 0% interest credit cards instead of going into an overdraft.
He also told consumers to contact debt advice services such as StepChange if they are struggling.
He continued: “Now the first thing if you’re overdrawn is to check your eligibility for a 0% overdraft and to what amount.
“People also ask me, can I shift my overdraft onto a 0% 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.”
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He advised those who have to use their overdraft to at least schedule their direct payments for just before payday, as “the longer you’re overdrawn, the bigger your interest charges.
However for those with multiple debts, the rule changes.
He advised people to make a list with all the debts in order of interest rates.
He said: “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.”
How can I pay off my debt?
If you’re struggling to pay off your debt, there are a number of techniques you can try and tackle the pile.
Negotiate with your lenders
If you’re finding your debts are mounting and you’re unable to make headway clearing them, you should talk to your lenders.
If you’re upfront about your struggles, they might help you set up a more affordable repayment plan.
Try out repayment techniques
There are a number of methods you can try using to clear your debt.
For example, the snowball method sees you paying off your priority bills and debts first, such as your mortgage and council tax, and then focus on clearing your easiest remaining debt.
While the avalanche method sees you pay all the minimum payments on your debts off first, and put any remaining money into paying off the loan with the highest interest rate.
Get free debt help
Struggling to get a grip on your finances? You can get free debt advice from charities.
Citizens Advice, StepChange and the National Debtline all offer help for nothing – you can find out how to contact them here.
