interest free overdrafts?

rogue_elements

is this a good thing to do and is it possible?

get a planned overdraft at 0%
withdraw it all at a cashpoint and stick it in a high rate savings account?

premierfella

Possible - yes.

Good thing to do - debatable, as:
- there are not that many free 0% overdrafts available in the market;
- the "high rate" savings account would not yield more than a few pounds p.a. on such 0% overdrafts;
- you would probably need to make SOME use of the account (i.e. cycle funds) to keep the 0% overdraft;
- fully utilising the 0% overdraft and actively using the current account raises the possibility of incurring charges if you forget to fund the account to cover any debits.

Not that any of the above should necessarily put you off...

paulmcerlean

Most accounts offering interest free overdrafts are added value, meaning there is a monthly fee. So unless you want the 'value added extras' then it can work out more costly than the standard overdraft rate.

How much of an overdraft do you want? As outside of student accounts the most you can expect ordinarily interest free will be £250 -500.

Also, do not use the Halifax if you want to borrow from overdrafts as you will pay £1 per day for the service arranged and £5 per day when not authorised.

Also, remember that an overdraft is repayable on demand and thus it is not a way to borrow outside of the short term - you could be landed with a large bill if you do not pay above the rate of borrowing into the overdraft account monthly or do not regularly fund it at all.

This will then start affecting your credit file.

Spooneroonie

I think this is basically a kind of current account 'Stoozing', and if you want to learn more about it, there is a whole discussion board dedicated to it in the credit card section of the forum.

Instinctively this feels like something you would need to actively manage to avoid fees for the sake of a really small return - especially with savings rates as they are - so probably not worth the effort.

Lokolo

Banks know about this and are trying to cut it out, especially with student overdrafts. They are known to withdraw overdrafts without notice to stop it.

If you want to take the risks then go ahead. But they are there!

YorkshireBoy

premierfella wrote: »

- the "high rate" savings account would not yield more than a few pounds p.a. on such 0% overdrafts;

I agree it depends on your credit 'status', but my £10K A&L overdraft stooz nets me £240 per annum after tax and fees (of £5 per month)...coincidentally the same as I paid for a week in Lanzarote in February.

Thanks A&L :beer:

rogue_elements

No, I have been offered an overdraft of £1500 at no cost. I have 4% savings so in a year I would make £60 which to me is certainly worthwhile. I may even get 2 accounts each with this overdraft and therefore be able to make £120 from it.

I am a student and it is a student account, but I have no use for the money at the moment (I don't require it for living costs).

They would have to give me at least enough time to pay off the overdraft if they withdrew it, right? In which case I could just move the money back from my savings to pay it off. They couldn't just charge me at 0 days notice if I was within the agreement?

master811

rogue_elements wrote: »

No, I have been offered an overdraft of £1500 at no cost. I have 4% savings so in a year I would make £60 which to me is certainly worthwhile. I may even get 2 accounts each with this overdraft and therefore be able to make £120 from it.

I am a student and it is a student account, but I have no use for the money at the moment (I don't require it for living costs).

They would have to give me at least enough time to pay off the overdraft if they withdrew it, right? In which case I could just move the money back from my savings to pay it off. They couldn't just charge me at 0 days notice if I was within the agreement?

I pretty much did this when I was a student and infact still have my interest free OD, though is reducing year by year. You won't be able to get more than one of them though. Normally any student account requires you NOT to have another student account already whether with the same bank or a different one.