Overdraft in to Savings account. Is it worth ?

Mishomeister

As a part of a staff benefit, at the bank that I work for, I am allowed to have a discounted overdraft rate of 1% above Base rate, meaning, that I can have an overdraft with the rate of only 1.5%.
So I was thinking if it is worth of getting as much overdraft(probably a few thousand) as I can and put the money in to a savings account and pocket the difference between rates?
While it might sound good, I am concerned, that it would make a big negative effect on my credit history as I am thinking of getting a mortgage in about one year time.

What do you think? Is it worth doing it?

Lokolo

For £1k overdraft you will get profit of £15 a year approximately, personally, not worth it for me.

Mishomeister

Lokolo wrote: »

For £1k overdraft you will get profit of £15 a year approximately, personally, not worth it for me.

Well I could do a Regullar saver and dreep feed in to it, so it would be deffinitely more, than £15

jamesd

Yes, it's a way to make money. But you should check that your employer will not regard continuous overdraft use as a sign of inability to manage money or risk of fraud. Also worth considering that other lenders who see continuous overdraft use may regard it as a risk factor.

YorkshireBoy

Mishomeister wrote: »

Well I could do a Regullar saver and dreep feed in to it, so it would be deffinitely more, than £15

How much more? Based on a £1K overdraft, even drip feeding an 8% regular saver would only generate...

£1,000 x 8% / 12 x 6.5 x 0.8 = £34.66
£1,000 x 3% / 12 x 5.5 x 0.8 = £11.00

So a total of £45.66

But it's cost you £15 to borrow the cash, so your net profit is £30.66

Any upward movement in base rate will obviously reduce this further, eg a move from 0.5% to 2% next month would mean the net gain is reduced to £15.66

What if the bank call in the overdraft and you're half way through the year? Do you forfeit any/all interest accrued to date on the regular saver? If so it's cost you money.

I'm doing the same as you, except my OD is £10K. It costs me 1.2% but offsets my 3.75% mortgage, thereby saving me £255 a year. I also don't work for a bank, but if I did I wouldn't be doing it!

Evilm

I don't know how overdrafts show on your credit files (so I'm not sure whether this is true) however i would be surprised if having your overdraft constantly in use doesn't affect your credit rating at all.

meer53

Big mistake to even consider this if you work for a bank and your savings account and overdraft are there too. I work for a bank and if i did it i'd be waiting for the tap on my shoulder !

Mishomeister

meer53 wrote: »

Big mistake to even consider this if you work for a bank and your savings account and overdraft are there too. I work for a bank and if i did it i'd be waiting for the tap on my shoulder !

I understand that, so the savings accounts would obviously be elsewhere