3 day clearance tactics

koru

Can anyone confirm if this following is right?

I have a big sum of cash which I want to transfer from account A to Account B, using webbanking for account A. A pays 3% interest, and B pays 5%. If I understand right, it will take 3 banking days for the electronic transfer, during which I will earn no interest.

But I think that interest is paid on a 7 day week, so if I request the transfer on a Friday, I will lose 5 days interest. Does that mean I would be better to request the transfer on a Monday, so that 3 banking days is equal to 3 days of interest, not 5?

(Incidentally, I do realise that I could request a same day transfer, but this costs £20, which would wipe out the interest saving.)

jonesMUFCforever

I think you are right.
Eric

realaledrinker

You lose 2 days interest. Money transferred on a Monday gets to the other bank on a Wednesday & earns interest from that day. Unless Bank A is Cahoot who for some reason hold onto your cash for an extra day.

doelani

if both accounts are with same bank they should be tranferred immediatly. If not you are right you should do tranferrs so they do not fall over a weekend as it will be 5 days loss of interest

koru

Thanks for the confirmations. I'm just surprised I wasn't already aware of it being a good idea not to do big transactions at the end of the week. Maybe Martin should publicise it more? (Unless he already has, and I just missed it!)

Maybe it is because I never had enough cash for it to matter, before!

newfoundglory

I don't see this as a problem at all - pretty much all savings account calculate interest on a daily basis (using the balance of the account at the close of business or every night); so this isn't usually a problem. I don't even know any accounts off the top of my head that calculate interest on a weekly or monthly basis, so i'm surprised you have this issue!

koru

I think you may have misunderstood. The whole point is that they calculate interest on a daily basis.

If you do a transfer on a Monday, it is withdrawn from your account on Monday, so you stop earning interest then. But it is not received by the second account until 3 banking days later: Wednesday. They don't start paying interest until Wednesday. So, you earn no interest on Monday and Tuesday, because your money is in banking limbo.

If you do the same transfer on a Friday, three banking days takes you to Tuesday, so no interest earned on Fri, Sat, Sun and Mon. Twice as much lost interest, because Sat and Sun don't count for clearance, but do count for earning interest.

newfoundglory

Oh, I see what you are saying. Yes of course thats how it works. It okay to transfer up until wednesday for banks which will put the payment into the clearing system on the same sday... so it arrives on Friday of the same week.

The simple solution to this is of course to just use a cheque (if you can) - although you will often lose 1 day. Sometimes, if the bank of the payee doesn't present the cheque quickly to the paying bank then you can find you actually earn interest on twice the amount you are trying to transfer (because in it will be cleared funds in both accounts; even though it has still to be debited from one of them).

AP

doelani wrote:

if both accounts are with same bank they should be tranferred immediatly. If not you are right you should do tranferrs so they do not fall over a weekend as it will be 5 days loss of interest

I think both accounts need to be with the same branch of the bank, i.e. with the same sort code for the transfer to take place on the same day (except for Lloyds TSB accounts when transfer between different branches also take place on the same day). Otherwise, I believe the 3-day rule still applies when you transfer money between accounts in different branches of the same bank.

It is best just to make such transfers on Mondays and Tuesdays only. As I understand, transfers from Cahoot, First Direct, Co-op and most ex-Building Society bank accounts take an extra day. This means that even the money leaves the first account on a Wednesday, very often it does not arrive at the second account until the Monday after.

Milarky

AP wrote:

I think both accounts need to be with the same branch of the bank, i.e. with the same sort code for the transfer to take place on the same day (except for Lloyds TSB accounts when transfer between different branches also take place on the same day). Otherwise, I believe the 3-day rule still applies when you transfer money between accounts in different branches of the same bank.

It is best just to make such transfers on Mondays and Tuesdays only. As I understand, transfers from Cahoot, First Direct, Co-op and most ex-Building Society bank accounts take an extra day. This means that even the money leaves the first account on a Wednesday, very often it does not arrive at the second account until the Monday after.

AP, you are right that some organisations take an extra day to the standard '3 banking day' cycle [Mon-Wed,Tues-Thu,Wed-Fri,Thu-Mon,Fri-Tues]. Did you know that Lloyds pays credit interest on BACS payments for three days after withdrawal - in theory compensating the customer for the actual delay in transferring money? [They are the only bank to do this, I believe]

Speeding it up..
If you have a 'slow' bank account of this kind, you can at least speed the transfer up from 3 to the normal 2 days by using a Debit card to pay the transfer into an Egg Internet Savings account instead. You can then transfer immediately [as the funds are withdrawable without delay] from the Egg account to the recipient account, and it takes the standard two days rather than the three it would otherwise.

[A note about withdrawals by debit card: Bank accounts seem to differ. Nationwide immediately notices the impending withdrawal and reduces your 'available balance' by that figure. The actual withdrawal is not instant and usually takes place on the same working day. With this sort of bank account you must top up the balance immediately so that you don't carry a negative 'available balance' overnight - otherwise interest will be charged. With other banks [A&L and FD] I think that they don't charge the customer until the withdrawal is made. However you won't get any warning that the withdrawal has taken place until the day after it does - so you need to move cash into the account by that expected date - not wait until it shows up!]

AndyR_3

I thought the majority (if not all) banks calculated interest based on working days - i.e. you don't earn any interest at the weekend anyway.

Is this not so?