Overdraft stoozing?

GrazzleDazzle

Hello I am 18 and starting Uni in October. I have been using credit cards responsibly since I turned 18 in January. I just checked my credit score today and it is 999 rated excellent.

This means that it is very likely I can get a 0% guaranteed overdraft of £2000 with no charges. I won't need an overdraft as I have a part time job at the co-op (which I'm keeping) which also offers flexible over time. My student loan covers the essentials and my part time job and allowance from my parents and my grandma mean I can save money throughout my time at Uni. So I won't need my overdraft at all.

So can I just get the big fat overdraft and plonk it into a current account and reap the interest? I looked on the best bank accounts on this website but they require salaries.. what is the best current account for this kind of stoozing? I can put the overdraft inside it and then plonk more savings I get through my part time work and allowance. In fact does a student loan count as apart of my income?

I would post this in the student part of the forums however students have very little or nil experience of stoozing. So I thought I would post here Thank you for your advice in advance!

innovate

A snag I can see in your plan is that overdrafts are repayable on demand. So you need to be careful with any commitments - - best to stick with instant access. But otherwise the idea sounds fine.

You don't need a salary to qualify for current accounts - - all you need to do is pay in any monthly amount they stipulate. They don't care where the money comes from, and the amount doesn't have to all be paid in in one go - e.g. you can cycle the same £1K (or £500, or £100 or whatever) through a number of current accounts. You can do that manually, using Faster Payments, or by Standing Order.

However, current accounts are probably not your best choice. Santander and Lloyds are the best with 3%, but minimum balance for that is £3K. You will only get 2.4% paid by the bank since they automatically withhold 20% basic rate tax. You might be able to reclaim that tax if you total income is below the personal allowance, but there's probably easier ways.

You might be best off with an instant access cash ISA, even if your total taxable income would be below your tax-free allowance. All interest rates are a bit dire this time of year, but come March/April, there might be some better offers, and you would be able to request a transfer. (Full ISA guide here)

Another one of interest could be the Nationwide 6% Regular Saver, which you can feed with up to £250 a month. But you must have paid £750/mth for 3 months into a Flexaccount before you qualify, and you have to keep the £750 going. All other Regular Savers require a 12 month commitment, which might be too high risk for you. (Regular saver guide here)

If you can afford it, Halifax pay you a fiver a month (net of tax), if you pay in £1K each month.

Good luck with your plan!

CrispieS

great idea, might look to do the same myself!

plunt

haha this is what i did!

I managed to open up 6 x santander prefered current accounts. all paying 5% on up to £2500.


To add to this i got a halifax over draft and made sure that I kept upping it over the years (0% interest) and then had a student account with another bank.


Also I made sure I used my lloyds vantage account for day to day transaction and held over 3 k in it so that it would be at the 3% interest rate (meaning no wasted money sitting in a current account at 0%)


slowly i have also increased my regular saver accounts with one in nationwide (6%), hsbc (6%), n&p (5%) and had a couple here and there but they have since lapsed.


oh and built up my credit rating with a halifax credit card that gave me £5 pounds a month (and one of there reward current accounts that pays me £5 a month)


word of warning. if you are doing something like this then make sure you ALWAYS have access to enough money to pay the overdrafts and credit card off. also set up an excel cheat tracking the balances, expiry dates of bonus rates, standing orders that need to go out, and transfers that need to go in each month to avoid fees (eg: transfer in 1k and transfer it back out again in santander to avoid a monthly fee)


oh and a side note, moving all this money around has actually built up my credit rating according to one bank which makes it appear to them that i have £10k ++ going in every month (if only!)


sadly my expiry dates for a lot of the above are coming to an end in 3 months time or so.


best of luck!


regards


P

Edit: oh and if you are earning below the savings threshold, you can reclaim a load to taxed interest!

zerog

Reclaiming interest? Has the R85 form been abolished in the past few weeks or something?

plunt

some people, like myself dont fill them out as you are unsure if you will be going over the limit by the end of the year.

cheers for the sarcastic comment - unneeded on this forum...


GrazzleDazzle if you need any help in terms of ideas to utilize the student accounts then give me a shout

regards

P

the-mango

GrazzleDazzle wrote: »

Hello I am 18 and starting Uni in October. I have been using credit cards responsibly since I turned 18 in January. I just checked my credit score today and it is 999 rated excellent.

This means that it is very likely I can get a 0% guaranteed overdraft of £2000 with no charges. I won't need an overdraft as I have a part time job at the co-op (which I'm keeping) which also offers flexible over time. My student loan covers the essentials and my part time job and allowance from my parents and my grandma mean I can save money throughout my time at Uni. So I won't need my overdraft at all.

So can I just get the big fat overdraft and plonk it into a current account and reap the interest? I looked on the best bank accounts on this website but they require salaries.. what is the best current account for this kind of stoozing? I can put the overdraft inside it and then plonk more savings I get through my part time work and allowance. In fact does a student loan count as apart of my income?

I would post this in the student part of the forums however students have very little or nil experience of stoozing. So I thought I would post here Thank you for your advice in advance!

My (lazier) way of stoozing is having an overdraft and then putting the majority of that money, except £100, into an instant access/esaver (in my case with the same bank...). I then use that £100 for everyday things so that I meet the terms of the account and check it out weekly, I keep rough tabs in my head so I know I won't go over the overdraft limit, I then transfer money in from the savings account to the current account as and when I need it.

Although I do other ways, this is my simplest way of stoozing, although £100 gets me a long way so I only need to check this bank every week or so.

This year I'm going to need to start cycling money to meet all requirements as I have more things on the go, but I'm sure it'll go fine!

Trentenders

Does it not look bad on a credit report to be constantly in your overdraft?

stevemcol

When I stoozed, years ago I remember having 2 interest free O/Ds (A&L, me and the missus) running concurrently and the money squirreled away in an instant access savings account (or possibly oneaccount mortgage, can't remember). Worked fine.

zerog

plunt wrote: »

some people, like myself dont fill them out as you are unsure if you will be going over the limit by the end of the year.

If unsure then just do it and cancel if you do go over. The bank will usually take the previous months' taxes off for you (but not all will refund you if you fill in the R85 late)

Trentenders wrote: »

Does it not look bad on a credit report to be constantly in your overdraft?

Not if you're not in the overdraft on the day that the bank reports your balance to the CRAs, e.g. midnight on the 1st of each month for HSBC.

Voyager2002

Couple of points:

1. The account offering the overdraft facility is a current account. Most current accounts don't pay much interest: they are where you park money in between getting paid and paying bills or whatever. Generally for high interest you want a savings account or deposit account. (Some banks offer high interest on current accounts in the hope that you won't have much money in them for long and so won't end up getting much interest.)

2. I doubt very much whether you will be given a £2,000 overdraft as soon as you start college. You will probably be offered a more modest amount, and this will gradually be increased as you demonstrate that you can use the account responsibly. In any event, always keep your overdraft a hundred pounds below the limit and pay something in every month (you can always take it out again the next day). That way, the bank will not get worried that you are either abusing their account (what you plan to do is something they would regard as an abuse) or might not be able to repay the borrowed money. Generally it is when banks get worried that they ask for the overdraft to be repaid.