Taking Out an Overdraft to make money: Advice Please

PaulAb_4

Hey there, I'm half way through my first year nearly, and as yet, am not a single penny in the red. I've been thinking of changing this however. Currently, I have a RBS student account, and I am planning to apply for an overdaft facility on it this week, and tomorrow I am opening a Bank of Scotland student account with an interest free overdraft.

What I was planning to do, was to get my student loan, and take all of my interest free overdraft money (Roughly £2500 from each bank), and put them into a high interest account at ICICI bank which has a 5.45% interest rate, with no minimum balance.

I'm fairly certain I am able to survive without needing my overdraft from working occassionally, and parental contributions, so not having any overdraft left over to spend shouldn't be a problem.

I was looking for advice regarding any problems I might have with this plan, and if anyone else has done anything similar and can point me in the right direction?

Thanks

agogo

I got a Lloyds student account this September and the balance on it has been around -£1300 constantly. No problem from Lloyds, and I put the money in a Lloyds savings account! If banks have policies that can lose them money it's their problem, not yours, so abuse that overdraft.

Just make sure that you keep to whatever you agree to when you open the account, e.g. only have one student account (if the agreement specifies), make sure your student loan/other incomes get paid into it (again, if the agreement specifies), etc.

techno_geek

It's a good idea, and it does work!

However, watch out as Halifax/Bank of Scotland tend to start new student account customers with an overdraft of only £500, which may or may not be able to be upgraded to £1000... you'll have to use the account for about 6 months before applying for an increase (which has to be done over the phone).

The simplified version of what I do is:
- Have a normal current account for all my day-to-day spending (e.g. Nationwide FlexAccount)

- Have my student loan paid in as follows: Term 1 loan to Student Account A, Term 2 loan to Student Account B, Term 3 loan to Account A, etc... (this way, you adhere to the main terms and conditions of the student account!)

- Transfer my student overdrafts into a high-interest savings account, such as ICICI... however, I always leave £100 of the overdraft available to cover any unexpected direct debits or in case I need cash in an emergency

- Have at least one Direct Debit (student credit card, phone bill, etc.) coming out of each of my student account each month... transfer money from your day-to-day account to cover it.

- Set up a standing order from your day-to-day account to transfer £10 into each student account each month - don't forget to set up standing orders on your student accounts to send the money back!!


Now (from the bank's perspective) it looks like all your student accounts are active, as you're paying money in and taking money out, paying bills, etc...

Hope this helps - good luck! Don't forget to use Online Banking to your advantage either!

squeaky

You might like to check out the stoozing board too:-

Stoozing (Free Cash from Credit Cards) Board

colin79666

I do believe the terms and conditions of an RBS student account state you must NOT have a student account with a rival bank...

hopingforahouse

Good idea, but RBS DO expect you to pay in your loan or whatever to their account. Also they expect regular usage of the account, and if you don't use it often enought they will demand the full amount of the overdraft. However, please be encouraged to use their overdraft amount to make cash, as without them offering me more and more each year, and then giving me a loan to pay it off I wouldn't be in the mess I'm in!

N.B - Not blaming them, but would YOU give £1000 to an 18 year old without a job???

powerbase

Many students who don't need their free OD use this. It's sound. You may as well make your money work for you. I still do it (I'm hanging on just with a graduate account as long as I can milk it as it's the same as a student account).

My savings account calculates interest daily so what I do is for one day after all the money is paid in to the current account is to dump my savings into my current account for a day so it looks like I have a huge max current account balance. I'm not sure how much good this does but I read somewhere that sometimes your max current account balance is recorded for credit checking purposes so that's why it's good to have your DD come out a day or two after you get paid (so that your balance doesn't look poor all the time with money coming in and going out the same day). I'm just taking it to the extreme and putting money in current account. I get good interest on the current account too so not really losing much and it doesn't take much time.

Just something to think about it may not be the best to have your account -2000 all the time but many people live on their OD because they have no other choice.

Good luck with student stoozing. It's a great time, get as much as you can for free.