TV personal finance expert Martin Lewis has warned debit card users not to spend beyond their current bank balance and rely on their overdraft too often.
Speaking during an episode of ITV Martin Lewis Live Money Show focused entirely on debt, the expert explained that overdrafts are one of the most expensive ways to borrow money and urged the audience to stay debt free by doing balance transfers to move expensive debt onto cards credit with 0 percent interest.
“Most consumer overdrafts are now 40 per cent, double the high street credit card, which means debit cards are now dangerous cards if you’re overdrawn,” he said.
“Now the first thing if you’re overdrawn is to check your eligibility for a 0 per cent overdraft and what amount.
“People also ask me, can I transfer my overdraft to a 0 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 your bank account so you can get rid of your overdraft, you now owe the card.
“It’s better to have big overdrafts, you need a good credit history.”
Mr Lewis warned his audience to treat overdrafts “like any other debt” and try to shift direct debit commitments so they run out just before payday.
“The longer you’re overdrawn, the higher your interest charges will be,” he added.
“So if you can move it to just before payday, you won’t be in debt as long and it should reduce the interest.”
He advised anyone with multiple debts to list all their obligations in order of interest rates, starting with the highest.
“Then you take all the spare money you might have and pay the highest interest rate regardless of the others. Once this one goes through, you will then focus on clearing the next highest interest rate.
“When that goes, you clear the next one and the next one and so on. It’s called snowballs and it means you get rid of your debt faster.”
In the same episode, the expert advised people – seriously – to put expensive cards in a bowl of water and leave them in the freezer to layer them in the ice and prevent the temptation to resort to difficult times.
For anyone really struggling with card debt, Martin Lewis suggested they contact services like StepChange for more help to get their finances back on track.