Expert's simple switch to avoid £600 'ghost debt' many might not recognise they have

The crippling reality of overdraft costs has been laid bare in a new study, but an expert has shared the simple switch people can make to avoid these debts in the face of the current interest crisis

Staggering new research has unveiled that millions of Brits find themselves overdrawn by more than £600 on a daily basis, prompting experts to offer advice on tackling 'ghost debt. ' According to a recent study by Moneycomms.co.uk, an alarming one in five individuals dips £697 into their overdraft each day, with familiar high street banks charging exorbitant daily interest rates.

TotallyMoney CEO Alastair Douglas has highlighted the concern that because this type of debt is typically extended automatically from people's current accounts, many aren’t fully aware of their overdraft status, making it a “ghost debt” that haunts unsuspecting account holders. Alastair challenged the misconception that overdrafts are a more economical choice compared to loans or credit cards, presenting five superior alternatives to dodge the punitive average 39.9% daily interest rate on overdrafts.

He cautioned: "Some customers might be sitting in their overdraft for all, or most of the time. This means they might be paying interest month after month, and struggling to get back in the black." Starting with using your savings, which may seem contradictive, but the expert assured: "It’s very unlikely that you’ll be earning anywhere near as much interest (in your savings account) as you would be paying on your overdraft. So consider using this money to clear your balance, and then you can focus on rebuilding the money in the bank."

The finance whizz has recommended that individuals keep an eye out for fresh deals, switching incentives, or interest-free overdraft schemes at other banks. However, it's not without its catches - to switch your overdraft, a credit check is usually in the cards, so it’s wise to ensure your credit report is spot on and current before applying.

Talking about 0% Money transfer cards, Alastair highlighted these under-the-radar options, stating: "A money transfer card is like a balance transfer, but a bit more flexible. If your application is successful, you’ll be given a cash limit which you can move from the card to your bank account, and you can use it to clear your overdraft. You can get up to 12 months interest-free on the borrowing."

He also touched on 0% Purchase credit cards, which are essentially a godsend for those drowning in debt, offering up to 21 months with no interest – a vital breathing space for clearing debts rather than merely servicing the burgeoning interest. Alastair advised: "Avoid using your current account until you’ve cleared your overdraft debt."

Alastair pointed out a lesser-known financial tip, saying: "You could secure an APR of below 10%, which is likely to be cheaper than your current overdraft rate — and you could even consolidate other debts. Just make sure you do the calculations first, and that you can keep up with the repayments." Loans could be a wiser choice for debt management compared to overdrafts for those with a solid credit score and a hefty overdraft limit, as the expert pointed out: “You could secure an APR of below 10%, which is likely to be cheaper than your current overdraft rate — and you could even consolidate other debts. Just make sure you do the calculations first, and that you can keep up with the repayments.”