Money saving maestro Martin Lewis has issued an urgent warning to millions of Brits about a banking practice he's branded a "demon" that could be costing households hundreds of pounds annually.
The founder of MoneySavingExpert.com delivered his stark message during a recent episode of his ITV show, The Martin Lewis Money Show Live, highlighting how many consumers are unknowingly throwing money away through outdated banking habits.
The Overdraft Trap Exposed
Lewis specifically targeted arranged overdrafts, revealing how these facilities have become profit centres for banks while draining customers' finances. "The demon in our banking system is the arranged overdraft," the consumer champion declared, explaining that even authorised borrowing through these facilities now carries exorbitant interest rates.
Many major banks now charge around 40% interest on arranged overdrafts - a staggering figure that can quickly turn small, temporary borrowing into significant debt.
Simple Switch Could Save You Hundreds
The solution, according to Lewis, is remarkably straightforward. He urged viewers to consider switching to banking providers that offer interest-free buffer zones. "If you're in your arranged overdraft month after month, you need to ditch and switch," he emphasised.
Several digital banks now offer interest-free overdrafts up to certain limits, potentially saving regular overdraft users between £200 and £500 annually. Lewis specifically highlighted providers like First Direct and Nationwide's FlexDirect account as strong alternatives.
Key Steps to Protect Your Finances
- Check your current overdraft charges - most banks now charge around 40% for arranged overdrafts
- Research switching opportunities - look for accounts offering interest-free buffers
- Consider your borrowing patterns - if you're regularly in your overdraft, immediate action could save you hundreds
- Don't delay - the longer you wait, the more you pay in unnecessary charges
Lewis stressed that with the current cost of living crisis squeezing household budgets, eliminating unnecessary banking fees represents one of the easiest ways to free up much-needed cash. "This is about behavioural change," he noted, encouraging viewers to break the habit of sticking with familiar but expensive banking providers.
The financial expert's warning comes as many families face increasing financial pressure, making his advice particularly timely for those looking to reduce outgoings without making significant lifestyle sacrifices.
