Martin Lewis issues warning over ‘most dangerous form of mainstream debt in UK’

Martin Lewis reveals 'the most dangerous form of mainstream debt'The Martin Lewis Podcast, BBC

Transcript

00:00The most dangerous form of mainstream borrowing in the UK isn't a credit card, it's an overdraft.

00:05Most overdrafts cost 40% interest.

00:09Compare that to a typical high street credit card of just 24.9%.

00:13So while many people think credit card's bad, debit card's good,

00:17actually, if you're overdrawn, your debit card is a debt card too,

00:22and it is more expensive than the credit card.

00:25To put it in context, people who have both will often think,

00:27I need to try and pay off my credit card with my overdraft.

00:30So they're paying off a 24.9% debt, but they're building up debt at 40%.

00:35You'd actually want to pay just the minimums on the credit card and get rid of the overdraft.

00:40Think of your overdraft like a debt. Plan to pay it off.

00:43So let's say you're paying off £100 a month.

00:45That means at the end of this month, if you've got £700 in your overdraft,

00:49you need to budget and go through things to make sure next month it's only £600.

00:53You want to move all your direct debits, if you can, to just before payday,

00:58so you're not overdrawn as much.

01:00And there are ways to cut the cost of your overdraft to 0% too.

01:04I'll be running through all that in my debt cost-cutting masterclass in the podcast.