0% overdraft on current account

Derivative

Has anyone used their overdraft to stooze (i.e shift the overdraft into a higher interest savings account)? I have a current account with base rate interest but a significant overdraft.

I plan to use the current account to recieve wages, student loan etc. and any excess (including 0% overdraft) into investments or my liquid savings account.

Halifax state their overdraft is repayable on demand and so I'll be using eSaver so that I can shift the money back as/when they demand.

Any useful input would be welcome, for example how likely it is Halifax pester me for the money after three months.

apt

Halifax will charge you £1 per day (£2 if over £2,500) if you are overdrawn which is much more than the interest you would earn in a savings account.

Lokolo

apt wrote: »

Halifax will charge you £1 per day (£2 if over £2,500) if you are overdrawn which is much more than the interest you would earn in a savings account.

I assume the OP is a student as they said student loan, which the Halifax charges don't come under (assuming student current account)

Derivative

Indeed, it is a Student Current Account. I am not eligible for other accounts as I don't have a regular monthly turnover.

ses6jwg

I did this for 3-4 years with my Natwest Student Current account ("deficit banking" its called) - I moved anything I didn't need for spending into a savings account and lived in my 0% OD.

It damaged my behavioural scoring quite badly when coming to apply for credit after leaving University.

opinions4u

EdgEy wrote: »

Indeed, it is a Student Current Account. I am not eligible for other accounts as I don't have a regular monthly turnover.

You could try opening a Halifax Reward account. Might struggle for acceptance if you can't state an occupation though.

If you have a £2,000 student overdraft limit (for example) you could then move £1k of this through the Reward account each month and then move it on again to a savings account (e.g Guaranteed Saver Reward). The other £1,000 of overdraft funds could live in a Halifax ISA Direct Reward paying 3% in these circumstances.

That should net you £110 a year in interest and rewards. And you could claim back £15 in tax deducted on the rewards if you're a non-taxpayer.

loveandlight

posted by ses6jwg
I did this for 3-4 years with my Natwest Student Current account ("deficit banking" its called) - I moved anything I didn't need for spending into a savings account and lived in my 0% OD.

It damaged my behavioural scoring quite badly when coming to apply for credit after leaving University.

I have never heard this term before 'deficit banking'. Can someone please explain in more detail?

ses6jwg

That rare student breed - those likely to be in credit - could PROFIT (provided they're financially disciplined) by opting for the account with the biggest 0% overdraft, then using a budgeting technique we call 'deficit banking'.

The premise is to keep as big a negative balance within your 0% limit as possible, then put this money into the top paying Instant Access Savings Account (and interest earned will be tax-free for most students). When your overdraft limit drops, move the necessary cash back to your current account (use the Tart Alert to remind you).

This means interest is earned on money the bank lends you for free, done right, this can add around £200 to a student's coffers over the length of a course, and similar tricks are possible with student loans (see the Student Funding article).


However, this isn't an excuse for spending or borrowing more. If you're not financially disciplined, DON'T TRY IT.]

Personally I wouldn't bother as it made it difficult to get credit for about 2 years after graduating

Derivative

Situation: (deficit banking)
Get paid £500 at the start of the month
Stick it in a savings account
Spend on your overdraft
Once you get interest from your savings account (let's say 0.2 or 0.3% for a month, so probably £1 or so on £500), pay off the OD

Now your current account is at £0 and your savings account £1.
Basically, earning interest on your overdraft.

Only works if you have a 0% overdraft.

loveandlight

ses6jwg
Personally I wouldn't bother as it made it difficult to get credit for about 2 years after graduating

How come? As long as you didn't go over your OD limit why would it have a negative affect on your ability to get credit?

YorkshireBoy

loveandlight wrote: »

How come? As long as you didn't go over your OD limit why would it have a negative affect on your ability to get credit?

Because the debt appears on your credit file and is therefore visible to anyone searching your file.

And overdraft debt is viewed more negatively than credit card or loan debt because it (normally) shows you're not managing your day-to-day finances very well.