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Featured Image Credit: ITV
Topics: Martin Lewis, Money, ITV
Anish Vij
The nation's trusted financial advisor is back again to issue a warning to people who use debit cards instead of credit cards to manage debt.
For years, Martin Lewis has put consumer rights at the forefront of his MoneySavingExpert website, trying to help us understand how money works and how we can ultimately save as much as possible.
On this occasion, the 52-year-old said he's 'got a warning' for those who don't use their credit cards in an effective way.
During a recent appearance on The Martin Lewis Money Show Live on ITV, he said debit cards are worse for people who have an overdraft.
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Lewis claims that most of the high street banks charge higher interest for the overdraft on debit card current accounts compared with credit card accounts.
Therefore, it would be more expensive to be overdrawn on a debit card.
"I’ve got a warning. Many people think when it comes to debt, debit cards good, credit cards bad," the finance journalist from Manchester said.
"But when it comes to debt, if you’re overdrawn, it’s credit cards bad, debit cards worse.
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"Most overdrafts with virtually all high street banks and many others are at 40 percent AER (like an APR, similar-ish).
"Credit cards, 25 percent.
"Overdrafts are the most expensive form of high street debt.
"Treat it like a debt - you want to get out of it."
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He suggests that switching over to First Direct might be a decent option since they offer £175 as a switching bonus, and a £250 overdraft at 0 percent.
"You get £175 for switching to it at the moment, you’ve gotta be new to it, and that can pay off some of your overdraft, and you get a 0 percent overdraft of up to £250 usually, not every time but most people do," Lewis added.
"But it doesn’t actually move your overdraft for you, so when you apply to switch, the normal process is your direct debits are moved over, your standing orders are moved over, that will happen.
"Normally it closes your old bank account but if you’ve still got an overdraft your old bank will say, hang on, do you want to pay this off, or we’ll keep it open because you owe us the money.
"So you’ll have to sort out paying that but you can go into overdraft on this one then pay off the old one."