Where does all the interest go to?

Milarky

Interest-ing discussion!

However when I balance transfer from Nationwide credit card to Egg credit card blow me over but the transaction now takes 1 day. I have found the same thing going towards Halifax cards too.

I assume this can't be 'BACS' and may therefore be a 'VISA' transfer - just like the 'overnight' delay when you use your credit card for spending on a Monday and it appears 'posted' to your account the next day. A VISA payment presumably works on the same lines as BACS except that there are no personal accounts [the payment is charged to 'VISA' and then reconciled to your own 'sub account' or credit card reference shortly thereafter] so it goes straight from 'point' to 'point'. If you take out the day in the 'middle' of the BACS cycle - it doesn't have to take any time to transfer money in principle - you might have the same thing as VISA settlement.

So, why can't all the requests for BACS transfers just be stacked up to midnight and then 'rolled' to the destination accounts at 2am or so in the morning to appear the very next day?

[On second thoughts, you can't see a credit card transaction on the 'day' it hits the account can you? - you have to wait 24 hours for it to be viewable - so it suggests that we could have one-day BACS type payments but the recipient account could not show the money as it arrived until one day later.]

KD

I've been extremely hacked off that in the 'electronic age' and the fact that most banks are 24/7 that they are still hanging onto the concept of 'working days'.

I am buying a house and having to transfer a large sum of money just before the weekend , hence losing even more interest. I dare not even use jack's little equation to calculate the loss.

Apart from banks being able to make money out of this - i'd like to know if there is any way (we)/ consumers could challenge this 'unfair' practice?

dunstonh

If its a large amount, then transfer the money by CHAPS rather than BACS. CHAPS is about 20 minutes. It may cost you £10 to use but if the interest saved is more, it may be worth doing.

Walletwatch

Banks charge more than £10 for CHAPS transfers (at least the banks I know do) - so best to check with your bank for their exact charges, and cut-off times before which you need to initiate these transfers to get funds same day in the destination account.

KD

Thanks for CHAPS suggestion, however already looked into this-:

My bank wants to charge £30 for CHAPS and is only guareenteed to 'hit' the receivers (lawyers) account until close of business. The lawyers want it by 2pm the working day prior to entry.

Even if I paid the £30, I'd have to do the CHAPS on the Thursday to ensure it hit the lawyers account on the Friday by 2pm. Then they have this rather substantial amount deposited over the weekend (which are not considered 'working days'- my original moan) until the Monday (entry date).

Why are weekends not considered 'working days' when most banks are 24/7 and clearly lots of transactions are now handled electronically and banks have staff working over weekends?

Personally think it's a swizz, an outdated practice that we need to challenge.

MarkyMarkD

Milarky wrote:

So, why can't all the requests for BACS transfers just be stacked up to midnight and then 'rolled' to the destination accounts at 2am or so in the morning to appear the very next day?

[On second thoughts, you can't see a credit card transaction on the 'day' it hits the account can you? - you have to wait 24 hours for it to be viewable - so it suggests that we could have one-day BACS type payments but the recipient account could not show the money as it arrived until one day later.]

I don't think your suggestion is very practical given the way things work at the moment.

There are too many stages in the (batch-based) process.

The paying bank needs to batch up all its BACS payment requests. That can only happen after midnight (unless there's an earlier cut-off, in which case not all payments requested one day will be processed that day).

That transaction listing is submitted to BACS, who have to process lots of these transaction listings from all the clearing banks, add them all up, work out who owes who what, and so forth. This isn't exactly an instantaneous process.

Once all the adding up and reconciling is finished, BACS send a copy of the relevant payment lists to each recipient bank. They have to then process it on their systems, which they do overnight that night. The money is there first thing on the third day, so that payments (e.g. DDs and cheques) due on the third day clear. Whilst the recipient bank COULD credit them with value on day 2, it wouldn't stop outgoing transactions due on day 2 from bouncing as they wouldn't know about the incoming money until too late in the day.

Where exactly is there time in this process for things to happen quicker? Whilst it's a batch processed system, it cannot happen quicker than 3 working days and I defy you to suggest otherwise.

In other countries where it DOES happen quicker, it's not a batch-based system. Effectively each transaction goes through the equivalent of the current CHAPS system in this country and hence arrives straight away. That might be a "nice to have" but I (as a customer) am certainly not prepared to pay for it - I don't CARE if transactions take 3 days to arrive, rather than paying more in some way (lower credit interest or whatever) to facilitate it.

MarkyMarkD

KD wrote:

Thanks for CHAPS suggestion, however already looked into this-:

My bank wants to charge £30 for CHAPS and is only guareenteed to 'hit' the receivers (lawyers) account until close of business. The lawyers want it by 2pm the working day prior to entry.

Even if I paid the £30, I'd have to do the CHAPS on the Thursday to ensure it hit the lawyers account on the Friday by 2pm. Then they have this rather substantial amount deposited over the weekend (which are not considered 'working days'- my original moan) until the Monday (entry date).

Why are weekends not considered 'working days' when most banks are 24/7 and clearly lots of transactions are now handled electronically and banks have staff working over weekends?

Personally think it's a swizz, an outdated practice that we need to challenge.

The idea that banks are 24/7 is a misplaced one.

Bank call centres are (normally) 24/7/365, but the rest of the bank isn't. Most banking transactions are batch processed, on a daily basis. The "offline" hours are required to complete this batch processing.

There's no reason why banks couldn't process transactions 7 days a week, even with batch processing, but it would cost money and most companies wouldn't benefit from the receipt of funds during the weekend as there would be nobody there to deal with it.

It's your lawyers requiring the funds a working day early - not the banks. I think your complaint needs to be directed at them, not the banks. Even if it WERE possible for your CHAPS to arrive on a Sunday, there would be nobody at the solicitors to check that they had arrived allowing the transaction to proceed on the Monday.

Working weekends for ANY business costs extra. Sunday trading is a bad idea as (essentially) the same amount of shopping is done over more days - more cost, no more revenue. Similarly, there's no real net gain to society if banks DID treat all 7 days as working days IMHO.

Walletwatch

To add to what Marky has said, we need to look at it from the perspective of the Banking machinery worldwide. The foreign exchange markets for instance, are closed over the weekends, though due to time differences, in the unlikely scenario that a Corporate in the US wants to do a deal, say hedge some forex exposure on Sunday, they can get it done by his bank through their Singapore correspondents, where it would be Monday by then. To that extent, the downtime of these markets is effectively one day a week roughly. The money markets (markets for interest rate instruments, say bonds and stuff) are also inoperative in most countries over the weekend.

The treasury divisions of banks who deal in these markets also have to cover the positions that are built as a result of the retail trades (people like you or me taking a loan, placing a deposit, or exchanging foreign currency, albeit not contributing a very large proportion to the bank's overall position) As they will not be able to cover these positions over weekends, due to the markets being non-functional, they are not able to allow you and me the privilege of having weekends as working days for settlement purposes, since they themselves are not accorded that benefit.

This is the reason why a bank which offers you 24/7 service will help you with your queries over a weekend, even carry out internal transfers promptly, as this is all money moving within the bank itself. But when it comes to executing a standing order for you, or a manual payment to another bank, they will take down your details, and advise you that the funds will only leave on the next working day.

It is just something we have to accept as part of the way the industry has to work... along with other good things like 0% cards and interest free overdrafts ;-)

deemy2004

MarkyMarkD wrote:

The idea that banks are 24/7 is a misplaced one.

There's no reason why banks couldn't process transactions 7 days a week, even with batch processing, but it would cost money and most companies wouldn't benefit from the receipt of funds during the weekend as there would be nobody there to deal with it.

Yes they do, exchange rate deals are on the basis of calendar days, interest is recieved or is payable on positions held over the weekend, eventhough the markets are technically closed, what happens is that because there is less liquidity the bid / offer spreads are wider.

KD

Thanks for the wider picture - i can see the need for some 'mechanics' and 'backroom' work needing to be carried out.

However, given the amount of e-banking that goes on why are weekends still down time. My friend has worked for a bank for 20 years, evenings and weekends, before call centres were ever introduced.....

Feels like the banks are too stuck in 'old practices' - almost feels like a cartel.

If 24/7 wasn't worthwhile and merely spread 5 days business over 7 days - then why are companies like Tesco so succesfull? Some bank somewhere must want to break the mould and usurp the competition.

I haven't a quibble with my lawyers - they want cleared funds to transact. I can't understand why banks can't guarentee payments to arrive at a destination by a certain time, if you are paying for a premuim service. Even the Royal mail / Fedex etc can track physical packages and guarentee deliver times!

Anyway - glad to get it off my chest - just don't think banking sector is trying hard enough for its customers!