Speaking during an episode of ITV’s The Martin Lewis Money Show Live devoted entirely to debt, the expert explained that overdrafts are in fact one of the most expensive ways to borrow money and urged viewers to stay clear of debt by carrying out balance transfers to move expensive debts onto credit cards with 0 per cent interest.
“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,” he said.
“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.”
Mr Lewis cautioned his audience to treat an overdraft “like every other debt” and to try to move direct debit commitments so that they go out just before payday.
“The longer you’re overdrawn, the bigger your interest charges,” he continued.
“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.”
He advised anyone facing multiple debts to list all of their obligations in order of interest rates, starting with the 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.”
In the same episode, the expert went on to advise people – in all seriousness – to place costly cards inside a bowl of water and leave them in the freezer to trap them in ice and thwart the temptation to resort to them in difficult moments.
For anyone in real difficulty with card debt, Martin Lewis recommended they reach out to services like StepChange for further assistance in getting finances back on track.
— to news.google.com