MARTIN Lewis has issued an urgent warning to anyone using their overdraft, stating that it is the “wrong place” to be carrying your debt.
The money saving guru called overdrafts a “danger debt” while appearing on ITV’s This Morning show today.
Martin’s comments were made in response to a viewer who called up asking for his advice after ending up £800 into her overdraft.
The viewer explained that she moved all of her separate debts onto her overdraft, but is struggling to pay off any of it – especially as she is currently living off maternity pay.
However, the consumer guru appeared concerned, replying “oh dear” to the viewer’s issue – and responded with a warning to her and other viewers.
Martin said that the annual interest rate you’ll pay on your overdraft typically stands at 40% – that’s much higher than that compared to that of a typical credit card which is usually 18%.
He said: “Your overdraft is the wrong place to be carrying debt. Overdrafts are a debt and in most cases they are now a very costly debt.
“If you have credit card debts, in most cases – unless they are high interest rates – you want to minimise what you are paying on the credit card to reduce the debt on the overdraft.”
He told the fan that she needed to start paying off her debt each month by having more money in her account, but also advised her to talk to her bank to ask for help.
After telling Martin her credit score was good, the financial expert also suggested switching her debt over to other banks with better deals on overdrafts, such as Nationwide, who is offering a one year overdraft with an interest rate of 0%, or First Direct.
He also suggested that the viewer could look into money transfer card.
These types of money transfer credit cards allow you to move over debts you already owe onto a new card, and you won’t pay interest on this amount for a set period.
How can I pay off my debt?
If you’re struggling to pay off your debt, there are a number of techniques you can try and tackle the pile.
Negotiate with your lenders
If you’re finding your debts are mounting and you’re unable to make headway clearing them, you should talk to your lenders.
If you’re upfront about your struggles, they might help you set up a more affordable repayment plan.
Try out repayment techniques
There are a number of methods you can try using to clear your debt.
For example, the snowball method sees you paying off your priority bills and debts first, such as your mortgage and council tax, and then focus on clearing your easiest remaining debt.
While the avalanche method sees you pay all the minimum payments on your debts off first, and put any remaining money into paying off the loan with the highest interest rate.
Get free debt help
Struggling to get a grip on your finances? You can get free debt advice from charities.
Citizens Advice, StepChange and the National Debtline all offer help for nothing – you can find out how to contact them here.
We pay for your stories!
Do you have a story for The Sun Money team?