Andrew Hagger of Moneycomms.co.uk today warned borrowers that overdraft costs could wipe out the discounts that shoppers receive during Black Friday promotions.
He Said: “The hype around ‘Black Friday’ and buying furniture and carpets in time for Christmas seems to increase every year, but before you get carried away with your debit card and max out your overdraft it’s worth weighing up the potential costs against cheaper alternative options.
Whether you’re going to blow a few hundred pounds or a four figure sum by repeatedly clicking the ‘add to basket’ button over the next few weeks, take a minute to understand what it’s going to cost in terms of interest and fees.
Some overdraft tariffs can be very reasonable – with First Direct charging just £1.96 if you’re in the red by £400 for a full 30 days – on the other hand a £2,000 overdrawn balance with a Halifax Current Account for 60 days will set you back an eye watering £180 – so what are the alternatives?
The credit card ‘Money Transfer’ or MT is often overlooked, but as you’ll see from the tables below can deliver huge cost savings when compared with an overdraft.
You have the same flexibility as an overdraft as the funds are transferred from your card into your bank account so you can shop for Xmas however you wish – that includes withdrawing cash at the ATM without having to pay the usual hefty credit card transaction fees.
The two most cost effective Money Transfer deals at the moment come from Virgin Money and MBNA offering 0% on the amount you borrow for 32 and 24 months respectively.
I’m not saying you should look to spread the cost of Christmas over such a prolonged period, however the only fee you’ll pay on these deals is a one off Money Transfer Fee which is 1.69% of the sum borrowed with Virgin Money and 1.99% with MBNA – both outperforming the high street bank overdrafts as you’ll see in the tables below.
Compared with a £1500 overdraft for 2 months an MT could easily save you more than £70 and for £3000 over 3 months the difference could be in excess of £210.
If it’s a credit card with a 0% deal you’d prefer, maybe for section 75 protection, look for maximum reward on minimum spend such as the new intu credit card which gives you a £20 gift voucher for just £250 spend – the equivalent of an 8% return.”
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