Martin Lewis' MSE issues warning over banks' common service for customers

The regular newsletter from the team has signalled that many banks are now charging interest rates of 40 percent.

By Rory Poulter, Personal Finance Reporter, Ruby Flanagan

11:08, Thu, Jun 6, 2024 Updated: 14:11, Thu, Jun 6, 2024

Martin Lewis issues advice on interest rates

Experts at moneysavingexpert.com - founded by Martin Lewis - have issued a 'danger debt' warning for those who rely on a bank overdraft.

The regular newsletter from the team has signalled that many banks are now charging interest rates of 40 percent.

Just this week, it emerged that the Lloyds Banking Group, which runs Lloyds Bank, Halifax and the Bank of Scotland, is massively increasing overdraft APR interest rates to as much as 49.9 percent for some customers.

As a result, the Martin Lewis team have suggested those struggling with making ends meet might find they are better off managing their spending by careful use of a credit card rather than an overdraft.

They said: "For those overdrawn, it's more a case of 'credit cards bad, debit cards worse', as almost all overdrafts are now charged at a typical 40 percent interest - nearly double even a bog-standard high-street credit card."

It comes as Martin Lewis' MSE also warned Nationwide customers that they could miss out on £200 as the group outlined what you need to do.

Martin Lewis

The regular newsletter from the team has signalled that banks are now charging interest rates of 40% (Image: Getty)

The newsletter went on to explain how you can avoid forking out on a punishing overdraft interest rate, most obviously by switching to a bank offering a better deal.

However, they said people should first check that the new bank will offer them an overdraft with favourable terms.

If you owe less than £425, MSE said you could be "paid to switch" to First Direct. First Direct is currently offering £175 in free cash to bankers who switch to its 1st Account and the first £250 on its arranged overdraft is interest free.

The team added: "So if your overdraft's up to £425, the £175 pays some off and the rest is at 0 percent. Above that you'll pay 40 percent, like elsewhere."

MSE also explained how you could sign up for Nationwide's FlexDirect account which comes with a 0 percent overdraft up to a certain limit for a year, based on your credit history. After this, the standard 40% interest charge applies.

Woman failed to register credit card with smartphone.