Martin Lewis has heeded warning to UK debit card holders, highlighting how they become 'danger cards' if you have an overdraft on your account.
Last week's episode of Martin's Money Show Live on ITV was dedicated to talking about debts, and how people can clear off money owed in a steady and effective way.
In which, Martin explained using balance transfers as a means of transferring expensive debts onto - per cent interest credit cards, and using the 'snowballing' method to slash owed balances.
And Martin gave several pieces of advice around clearing debts including using balance transfers to transfer expensive debts onto 0% interest credit cards.
Read more: Martin Lewis advises anyone with credit card debt to try bowl of water in the freezer trick
The Examiner reports that he also advised people in serious trouble to contact services like StepChange if they are in real difficulty and can't dig themselves back out of debt. But Martin Lewis issued a warning over people using debit cards and especially if they're attached to an overdraft.
The Money Saving Expert set out how overdrafts - ie, the ability to 'go overdrawn' in a bank account and repay the bank the money later, for example to make sure a bill or bit of spending isn't stopped by the bank due to lack of funds - is actually the most expensive way to go about borrowing money.
Martin explained that the average bank loan is under 8 per cent APR (the cost of borrowing rate); and the average credit card rate is 19 per cent 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 per cent, 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 0 per cent overdraft and to what amount. People also ask me, can I shift my overdraft onto 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 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.
"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."
Martin added: "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."
Read next:
- Martin Lewis warns that millions are being underpaid on cash ISA savings accounts
Martin Lewis' urgent warning to anyone with credit card debt
Martin Lewis' MoneySavingExpert explains how people can get hundreds of pounds for free
Martin Lewis' MoneySavingExpert team issues useful advice on fixed rate mortgage deals
Martin Lewis issues water bill advice that could save households hundreds of pounds
