Martin Lewis issues 'hideous' warning to people at five major banks

Martin Lewis issues 'hideous' warning to people at five major banks
-Credit: (Image: Reach Publishing Services Limited)


Martin Lewis has issued a "hideous" warning to customers at some of the most popular banks in the country. The Money Saving Expert founder had a warning on Twitter, now X, on Wednesday October 2 as he called for caution and vigilance around overdrafts.

“Overdrafts are a danger debt typically at a hideous 40% Apr, nearly double even a high street credit card. If possible (I know it’s not easy) you should prioritise reducing them ahead of most other debt," the ITV regular said. He warned: “A typical interest-free overdraft is about £250, to help ensure that bills are paid even if someone doesn’t have enough money in their account."

The BBC presenter added: "But the interest charged on overdrafts beyond the free level is very expensive – at about 40% APR on many accounts. That means anyone finding themselves using one regularly should consider another form of borrowing to cut costs and clear their debt.”

READ MORE Martin Lewis issues 'must do' task for energy customers

An overdraft allows you to spend more than you have in your current account. It's essentially a loan from your bank and you'll be charged interest. Overdraft limits are usually set when you first apply to open an account, based on your individual financial circumstances.

Occasionally banks will offer an automatic overdraft, but generally they will consider your monthly incomings and outgoings, your credit score and employment status before deciding how much they're willing to offer you. Your bank might agree to extend your overdraft limit at a later date, either temporarily or permanently. But all banks can reduce or cancel an overdraft at any time.

It comes after Lloyds Banking Group – Lloyds, Halifax and Bank of Scotland – began changing overdraft charges for customers from August. Some are increasing, some are reducing. The new 19.9% and 29.9% charges are lower than most major banks.

But the new 49.9% charge will be the highest overdraft rate charged by a high street bank. If Barclays customers use an arranged overdraft of £1,200, the annual rate of interest they will be charged you is 35.0%, and HSBC charges 39 per cent.