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14 January 2020, 13:17
The finance expert and journalist explained that some huge changes are coming to
If you're currently in your overdraft, you might want to hear Martin Lewis out, as huge changes are coming soon to the majority of UK banks.
The Money Saving Expert founder and journalist has issues a urgent warning, explaining that fees for those currently in their overdrafts could hike massively in a matter of weeks.
Brand new rules from the Financial Conduct Authority mean that several banks will hike the interest fee to 40 per cent.
Martin, speaking on the ITV Money Show, said: "The changes are happening right now.
"The problem with overdrafts is that they're a stealth debt.
"You don't apply for them, you just end up in them. And right now everyone with a bank account needs to understand what's changing - good and bad.
"Back in 2005, banks would charge £35 a pop for going overdrawn.
"It would be £35 per transaction ie if you made seven transactions, you'd be charged seven times.
"The system was designed to entrap customers."
He added: "Last July, the regulator said that from April 2020, banks will no longer be able to charge you a fine for going over your overdraft limit.
"That means that while they can still charge you what it costs them, they won't be able to impose daily penalty charges.
"It took 10 years, but we got a win."
From April this year onwards, all banks will have to charge interest rates for their overdrafts as they're no longer allowed to do daily charges.
Nationwide bank has already changed from their 50p a day charge to 39.9% interest.
HSBC, M&S and First Direct all switch on March 14th.
Martin said: "The straight fact is, if you're overdrawn in future, you're going to pay 40% interest on your overdraft."
Explaining to viewers what action to take, Martin said if you have savings - you can use them to pay off a small overdraft.
Talking to one who had a £1,000 overdraft he said: "There are 0% overdraft current accounts.
"First Direct pays you £100 for joining it, and then gives you a 0% overdraft up to £250. You pay off £650 and then we're back into 0% overdraft."
"Alternatively, Nationwide offers a 0% overdraft for a year but this depends on your credit score. They might give you £1,000 - but there's no upfront cash bonus.
"There's also the option for a money transfer card. This is 0%. These cards let you switch your debt onto an interest-free card.
"But it comes with a charge - on £1,000 there'll be a £30 fee, you then have up to 30 months to pay it off."