Martin Lewis has issued a dire warning to those who have an overdraft on their debit cards, branding them “danger cards”. A new series of The Martin Lewis Money Show Live aired on ITV1 on Tuesday and Mr Lewis devoted the first 60 minutes to a discussion on debt
He gave a number of pieces of advice about clearing debts including using balance transfers to move expensive debts onto zero percent interest credit cards.
Mr Lewis also advised people in serious trouble to contact services such as StepChange.
The Money Saving Expert explained that the ability to go “overdrawn” in a bank account and pay the money back later is the most expensive way to go about borrowing money.
According to Mr Lewis, the average bank loan is under eight percent APR (the cost of borrowing rate), while the average credit card rate is 19 percent APR.
He said: “Credit cards are horrible. Debit cards are great’. Not true.
“If you’re overdrawn, your debit card is a debt card, and 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.
“Now the first thing if you’re overdrawn is to check your eligibility for a – percent overdraft and to what amount.
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“With your overdraft, treat it like every other debt. Try to shift your direct debits to just before payday, so the longer you’re overdrawn, the bigger your interest charges.
“So if you can move it to just before payday, you won’t be in debt for as long and it should reduce the interest.
“If you have multiple debts, the rules change. I want you to list all your debts in order of interest rates, highest first.
“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.”