Interest on BACS Credits

Dagobert

In order not to pollute the [thread=475213]Sainsbury thread[/thread], I am copying this question into a new thread:

ED wrote:

Dagobert wrote:

I have 25 regular savers and I pay all of them "manually" by BACS (except those that require a Direct Debit) and they all mature successfully.

Impressive. In your experience, which of these building societies + banks pay interest from the same day as your BACS (done manually during working hours?), compared with how many delay paying interest until the next banking day - potentially causing nil interest on a Sat+Sun+Bank Holiday Mon?

Would more of your regular savers receive interest from the same day if the funds arrived via Standing Order (arriving around 1am)? I too have regular savers with many societies, so am keen for your response - thanks.

Presumably the same would apply for external transfers to + from this tasty Sainsbury's Bank savings account?

Biggles

I think there might be some misunderstanding about the term 'manually' here. All BACS payments are electronic (even if you set them up 'manually' on your online banking) and arrive overnight like SOs & DDs. This is different from 'manual' bank giro credits, where you walk into your bank and hand over a payment slip to another account at another bank.

I think all banks apply interest to 'cleared' funds on the day of receipt. That would include BACS and manual credits. It should also apply to all building societies but there may be an additional delay in the money getting from their clearing bank to their customers' accounts.

The bit where you lose interest is while the funds are 'in transit'; this would be slightly longer with manual credits (unless to another branch of the same bank) and could be much longer with building societies and other non-clearing banks (maybe like Sainsburys?).

Dagobert

ED wrote:

which of these building societies + banks pay interest from the same day as your BACS ..., compared with how many delay paying interest until the next banking day ... ?

You will find this information in the T&Cs of your savings products. Unfortunately, however, they are very often silent or ambigious on this point (for instance using the word day where it should be working day or calendar day.

Some pay from the day of receipt, some from the working day after, some from the calendar day after.

If in doubt it is best to aim for the money to arrive on a Thursday.

ED wrote:

Would more of your regular savers receive interest from the same day if the funds arrived via Standing Order

Standing orders are repeated BACS payments. Therefore it does not make a difference whether you instruct your bank to send by SO or one-off BACS payment.

This might only make a difference to when the money leaves the sending account depending on when you set up the one-off instruction and varying with each bank.

ED wrote:

arriving around 1am

The money arrives on day 3 of the BACS clearing cycle.

ED wrote:

Presumably the same would apply for external transfers to + from this tasty Sainsbury's Bank savings account?

It is not a question where the money comes from, just where it goes to and when it arrives.

Dagobert

Biggles wrote: »

I think there might be some misunderstanding about the term 'manually' here. All BACS payments are electronic (even if you set them up 'manually' on your online banking)

Thank you for pointing this out. The word "manual" was a rather unfortunate choice to describe one-off BACS payments as opposed to Standing Orders.

Biggles wrote: »

I think all banks apply interest to 'cleared' funds on the day of receipt.

Unfortunately, they don't: some pay from the day of receipt, some from the working day after, some from the calendar day after.

Biggles wrote: »

there may be an additional delay in the money getting from their clearing bank to their customers' accounts.

I have never seen a delayed arrival. The money is always credited on day 3 of the BACS clearing cycle. When the bank or building society starts paying interest, depends on their policy.

There is, however, a delayed send. For instance, Alliance & Leicester and Cahoot hold on to the money an extra day before passing it to the BACS system, thus earning an extra day's interest.

Biggles wrote: »

The bit where you lose interest is while the funds are 'in transit'; this would be slightly longer with manual credits

To clarify: you refer to manual bank giro credits here, not automated BACS Direct Credits.

Biggles wrote: »

and could be much longer with building societies

The BACS transfer NEVER takes longer. See above.

Biggles wrote: »

and other non-clearing banks (maybe like Sainsburys?).

Sainsbury's use Halifax as a clearing bank. Any BACS transfers go straight into the Sainsbury's savings account, which is, in fact, a Halifax account.

ED

Thanks, Dagobert - and input welcome from others, too. Some people may assume this thread belongs in the section for Banking (cheque/current accounts), but indeed it is relevant for savings accounts, as it relates to depositing into them.

Biggles wrote: »

I think there might be some misunderstanding about the term 'manually' here. All BACS payments are electronic (even if you set them up 'manually' on your online banking) and arrive overnight like SOs & DDs.

My method varies from your's for online issue of BACS - I think? Typically 9am-3pm I make a BACS payment. I'm guessing you + Dagobert pre-arrange your BACS not less than the evening beforehand, so cleared funds arrive as early as 1am and technically are in the destination account for the whole of that day. Is my assumption correct?

I prefer day-time issue of BACS from some institutions because, earlier that day, cash is deposited over-the-counter - earning interest in external savings account(s) till previous day.

Dagobert

ED wrote: »

Typically 9am-3pm I make a BACS payment. I'm guessing you + Dagobert pre-arrange your BACS not less than the evening beforehand, so cleared funds arrive as early as 1am and technically are in the destination account for the whole of that day. Is my assumption correct.

ED, I do not know where you are getting these times from. The only thing that matters is the cut-off point for BACS payments of the sending bank. And these times vary from bank to bank. They can be as early as 11:00!

There is no time of arrival, just date of receipt. Whether you get interest on the day of receipt depends on the receiving bank's/building society's policy.

I often arrange transfers on the day I want the money to go out so it remains in a higher interest savings account for as long as possible.

Biggles

Dagobert wrote: »

Unfortunately, they don't: some pay from the day of receipt, some from the working day after, some from the calendar day after.

I suspect you'll find that all the main clearing banks calculate interest on the cleared balance for that day (which would include an automated credit). As I said, it might differ for BSs and other bodies.

I have never seen a delayed arrival. The money is always credited on day 3 of the BACS clearing cycle. When the bank or building society starts paying interest, depends on their policy.

It's nothing to dowith the BACS cycle, it depends whether the BACS credit ends up in your account or in your building society's account while it awaits internal transfer.

There is, however, a delayed send. For instance, Alliance & Leicester and Cahoot hold on to the money an extra day before passing it to the BACS system, thus earning an extra day's interest.

Sadly, I think this is universal. The thing is, personal banking customers don't have direct access to BACS. We have to give instructions to our bank (usually via online banking) and wait for them to initiate the BACS payment.

The BACS transfer NEVER takes longer. See above.

It isn't the BACS system that takes the extra time. See above ;-)

Sainsbury's use Halifax as a clearing bank. Any BACS transfers go straight into the Sainsbury's savings account, which is, in fact, a Halifax account.

Exactly. They have to use a clearing bank. Sometimes this leads to the extra delay, sometimes not. In those circumstances, I doubt they would pay interest until it arrives from the clearing bank into your own savings account; this may be instant with some, eg Sainsburys, or it may take a day or three as you said above :-(

Milarky

Roll on November! I suggest we then all start sending one-off payments of between 1p and £1 like mad between all the accounts we individually hold and can then report back to a forum like this where those backlogs still appear. If any bank still requires a day's notice to send a payment, and is not working on a 'set-up-and-pay' basis as the better ones are now we will still have quibbles there, for instance, even under a 'same-day' transfer scheme.

I'd always assumed that a BACS receipt was exactly like a cash receipt and earned interest from the next working day (on the equal assumption that you got interest on the other account that included the date of withdrawal - because it's symmetric) However I suspect that's not quite right.

With cheques, from November, where you write your own cheque it will take two days to be drawn on your current account - but you will get interest from the savings account from the third day - including the date of deposit (eg Monday to Wednesday) This implies that banks don't pay interest for the date of withdrawal (so ought to pay it from the date of deposit just to be symmetric) and there is no reason why BACS receipts should not fall into line with that: Interest on deposit/no interest upon withdrawal

Biggles

Milarky wrote: »

Roll on November! I suggest we then all start sending one-off payments of between 1p and £1 like mad between all the accounts we individually hold and can then report back to a forum like this where those backlogs still appear

Damn right. But isn't there still a suggestion that there'll be a small charge per payment, or has that gone away? Now that banks are finding they can't get away with penalty charges, they've got to try and make it up somewhere else.....

ED

Milarky - I agree with your idea (repeated above).

Biggles - The banks are greedy if truly thinking of using the reimbursement (a 'dip in the ocean') as an excuse, considering their vast profits by other methods.

Biggles

ED wrote: »

Biggles - The banks are greedy if truly thinking of using the reimbursement (a 'dip in the ocean') as an excuse, considering their vast profits by other methods.

Er, yes. And your point is.....? ;-)

But seriously, there will be millions of transfers, more even than there are now, and they will mount up. Hopefully I'm wrong and have missed the bit where the idea of fees was scrapped.