Direct Debit Versus Standing Order ?

exel1966

I've just opened a new savings account with Cahoot and was wondering which is the quickest, most efficient way to transfer funds from my Lloyds Current Account to the savings account on a monthly basis ?

I would transfer using the Lloyds On-line service, but which is quicker - DD or SO ? or will they both take 4 days to clear into the Cahoot account ?

Thanks

grumbler

*I think* DD and SO take the same time, but SO needs less caution as you cannot transfer more than available balance (including authorised overdraft limit):

Word of warning re. ING Direct & other online savings accounts

charlieboycat

Direct debit means you lose no days interest - it's debited to your Lloyds account the same day its credited to your Cahoot account.

Standing order means you lose at least two days interest (debited to Lloyds Monday/Tuesday/Wednesday = credited to Cahoot Wednesday/Thursday/Friday), but sometimes four days interest (debited to Lloyds Thursday/Friday = credited to Cahoot Monday/Tuesday). And even more over a bank holiday weekend.

grumbler

I must admit that I was wrong in my post above . I have called Nationwide and was told that if I have SO on my account and this transaction makes me overdrawn over agreed limit SO will be bonced and I will be charged £20(£30?) - the same as with bonced DD. I also think now that charlieboycat is right regarding trinsfer time. All this makes DD better than SO.

Bennifred

I would choose SO over DD every time. You are in control of SOs - amount and time. DDs are in the control of the other party - they decide when to take etc (yes I know they are supposed to give you notice ). It is much easier to change SOs (again on your say-so alone). This is just my opinion, by the way, formed by years of dealing with inefficient institutions taking incorrect amounts at wrong times by DD - never happens with SO.

exel1966

Looks like mixed views here and I was erring on the side of the SO as this would give me complete control, but I don't fancy losing the 3-4 days interest each month whilst I'm waiting for the funds to clear. Over a couple of years that would equate to nearly 3 months interest lost !!!! One day (in my dreams) it'll be an instant transfer just like it is in other countries - what a CON !!!

I've yet (fingers crossed) to have any problems with DD's so may use that method. Will have to check with Lloyds tomorrow I think.

Cheers chaps.

Have since tried out the Cahoot on-line "contact us" service who replied within 2 minutes and confirmed that DD's and SO's both take 4 days to clear from Non-Cahoot accounts.
Now that has left me with a dilemma - Lose 48 days interest pa. or stick with my Lloyds on-line saver paying 0.85% less and be able to transfer funds between my 2 accounts very simply and all actioned on the same day.

charlieboycat

exel1966 wrote:

Have since tried out the Cahoot on-line "contact us" service who replied within 2 minutes and confirmed that DD's and SO's both take 4 days to clear from Non-Cahoot accounts.
Now that has left me with a dilemma - Lose 48 days interest pa. or stick with my Lloyds on-line saver paying 0.85% less and be able to transfer funds between my 2 accounts very simply and all actioned on the same day.

Not sure what Cahoot mean by "clear" re a dd - maybe whern they'll let you withdraw. But I can confirm from past personal experience that they pay you interest from the day it is credited to your account (being the same day it id debited to your bank account).

masonic

exel1966 wrote:

Have since tried out the Cahoot on-line "contact us" service who replied within 2 minutes and confirmed that DD's and SO's both take 4 days to clear from Non-Cahoot accounts.
Now that has left me with a dilemma - Lose 48 days interest pa. or stick with my Lloyds on-line saver paying 0.85% less and be able to transfer funds between my 2 accounts very simply and all actioned on the same day.

I agree with charlieboycat on this one - if you are skimming payments off your salary, for example, then you could time the dd payment so that it is collected on the day that the money is deposited in your account and you would normally start earning interest straight away.

On the subject of lost days interest, you would not lost 48 days interest pa. as the lost interest will only apply to 1 months contribution, not the whole balance. Overall, your whole account balance would be subject to the same 4 day loss, which, assuming a rate in the region of 5%, would be equivalent to less than a 0.1% reduction in that rate, so certainly not something worth opting for a lower rate account for even if it did apply.

grumbler

exel1966 wrote:

...Now that has left me with a dilemma - Lose 48 days interest pa. or stick with my Lloyds on-line saver paying 0.85% less and be able to transfer funds between my 2 accounts very simply and all actioned on the same day.

If you are not afraid of some maths _pale_ you can find rigorous solution of this problem in this tread:

when a regular saver is worth it: :think:

The similar problem was discussed here:

Stay with A & L or Move To Cahoot !!
What difference in % is required to pay to switch savings accounts?

MarkyMarkD

masonic wrote:

I agree with charlieboycat on this one - if you are skimming payments off your salary, for example, then you could time the dd payment so that it is collected on the day that the money is deposited in your account and you would normally start earning interest straight away.

On the subject of lost days interest, you would not lost 48 days interest pa. as the lost interest will only apply to 1 months contribution, not the whole balance. Overall, your whole account balance would be subject to the same 4 day loss, which, assuming a rate in the region of 5%, would be equivalent to less than a 0.1% reduction in that rate, so certainly not something worth opting for a lower rate account for even if it did apply.

DO NOT DO THIS!

There is no guarantee that the debit will hit your account after the credit - if you time the DD to match pay day exactly, there is a significant chance the payment will bounce and you will be charged.

I concur that DD is the best method, but if you want to do it like this, you must allow one day to be 100% safe. I.e. pay day 1st of the month - DD on the 2nd of the month.

jb478914

i concur, never have a DD going out on the same day funds are due in

the amount of people that I have on the phone wanting to know why their DD's were returned beggars belief

have the cleared funds in the day before the DD goes out