Martin Lewis: How credit cards can be used to clear overdrafts – best 0% deal revealed

Martin Lewis appeared on ITV on Thursday to cover the latest financial developments and coronavirus news. The Money Saving Expert spent much of his time analysing Rishi Sunak’s new announcements but he also covered general banking news, ISA developments and travel insights.

READ MORE

  • Martin Lewis: Urgent warning as SEISS deadline ends soon

Martin Lewis has also become adept at handling questions on the fly and he continued to be on fine form last night.

A viewer named Matthew Collison asked Martin the following question: “Can you put an overdraft onto a zero percent credit card and pay off over the longer term to stop the 40 percent coming into force?”

This is a very pertinent question given that many banks plan to raise their overdraft charges in the coming weeks and months.

Fortunately, Martin provided some good news in his response: “Yes, you have to use a special credit card called a money transfer credit card, a zero percent money transfer which pays the money into your bank account which will then clear your overdraft so you will owe the credit card the money.”

Martin went on to warn though that consumer’s options in this area may be limited: “Now there are very few of this currently and many have been withdrawn.

“The only one of a decent length available to all is with MBNA, which is up to 18 months zero percent for a three percent fee off the top of my head, you can double check that but I think I’m right.

“So, you’d want to apply for that and if you get the credit limit it is a good way to clear your overdraft.

“Then you owe the card, just make sure you make the minimum payments and you clear the card before the zero percent ends or it will jump up to 20 percent or something like that.”

DON’T MISS:
Tax Credits warning: Renewals must be done by end of month [WARNING]
Tax warning: Your ISAs and pensions could be raided [INSIGHT]
Martin Lewis reveals if SEISS grants will be ‘clawed back’ by HMRC [EXPERT]

Banks across the UK announced in recent months that they were planning to raise the fees for using overdrafts to as high as 40 percent.

This plan was eventually delayed because of coronavirus but consumers may start to see their costs rise over the coming summer months.

The FCA were taken back by the announcements and asked banks to explain their reasoning.

Despite this, the regulator announced at the beginning of July that they do not intend to take investigations further.

READ MORE

  • Stamp duty changes: How will they affect Help to Buy customers?

As their announcement detailed: “The new overdraft rates came into force between November 2019 and April 2020, following the rules we published in June 2019.

“In January 2020, we wrote to firms to ask them to explain how they reached their new overdraft rates.

“We have analysed the strategic, competitive and financial drivers of banks’ overdraft pricing decisions based on their responses.

“Having reviewed the evidence we obtained we do not intend to open a formal investigation at this stage.”

Their announcement went on to advise consumers themselves on what should be done: “It will take time to see the full impact of the new rules as banks respond competitively to one another.

“Overdraft charges are still higher than other mainstream borrowing products like credit cards and personal loans.

“But we expect these forms of credit to create more competitive pressure on overdraft charges as consumers respond to the pricing changes and greater transparency.

“Consumers using overdrafts should think about whether that is the right product for them, as other products may well be cheaper or more suitable.”

Source: Read Full Article