Martin Lewis' official website, Money Saving Expert, has issued a stern warning to people caught up in their overdrafts, dubbing the failsafe a 'danger debt' through its heavy fees which incur when used. An overdraft typically allows you to borrow money through your current account, letting you withdraw more than your contents.
But almost every bank has rates of around 40 per cent according to MSE, which is far higher than your typical credit card rate. However, always full of advice, Martin's site has explained that there are numerous ways that you can cut overdraft costs and save money.
The latest MSE newsletter recommends firstly checking to see if you can switch to a 0 per cent overdraft. Although there's no guarantee of this, as well as no certain method to have your existing overdraft's limits matched - it's worth exploring all avenues.
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The Mirror reports that in order to do this, you should use an overdraft eligibility checker before you apply to determine the likelihood of acceptance. Nationwide offers some new customers a 0 per cent overdraft of up to £1,500 with its FlexDirect account, but the rate only applies for a year.
You'll have to clear all arrears during that timeframe. Another option is to partake in a 0 per cent money transfer.
This involves taking out a specialist money transfer card, which will see money paid directly into your current account to eradicate your overdraft. If you opt for this though, do keep in mind that you'll have to pay the credit card off during the 0 per cent period - to avoid further charges.
At the time of writing, the longest deal from MBNA allows a 0 per cent rate for 14 months, in exchange for a 3.49 per cent fee of the amount transferred. Once the money has cleared your overdraft, you should in-turn ask your bank to cancel your overdraft altogether.
There are also two different types of overdraft available through banks - authorised and unauthorised. An authorised overdraft is where you agree a limit with your bank, and you can spend up to that threshold.
Unauthorised on the other hand is where you've exceeded an agreed limit on an arranged overdraft, or you've spent more than you have in your account altogether. Should you be struggling severely, speak to your bank to discuss potential support options.
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