Maxing out interest free overdraft and putting it into savings

Lisa11campi

Hi,

I have a £800 interest free overdraft with my student account. I do not need to use this. Therefore I am thinking about moving this £800 into my savings account, so that I can earn interest on it. I have two questions about this:

1. Is it illegal, or against any terms and conditions or bank accounts?
2. Will the fact that I am constantly in my overdraft affect my credit score?

Thank you in advance :-)

Tixy

Yes you can do that and not it won't be against the T&Cs of the account.

Obviously it is repayable on demand so probably best not to put it in a savings account that requires a long notice period.

2. Will the fact that I am constantly in my overdraft affect my credit score?

It could affect your ability to get new credit accounts. It won't necessarily make a huge difference but it will be one of the many things that any potential lender would consider when making a lending decision.

BugsyBrowne

Lisa11campi wrote: »

Hi,

I have a £800 interest free overdraft with my student account. I do not need to use this. Therefore I am thinking about moving this £800 into my savings account, so that I can earn interest on it. I have two questions about this:

1. Is it illegal, or against any terms and conditions or bank accounts?
2. Will the fact that I am constantly in my overdraft affect my credit score?

Thank you in advance :-)

That should bank you about £20 interest for the whole year.

msallen

BugsyBrowne wrote: »

That should bank you about £20 interest for the whole year.

2.5% after tax on £800. She'll be lucky (unless using the NW FlexDirect 5% for a year). More likely about a quid a month I'd have said.

simeyb

What often gets overlooked is developing a good relationship with your bank (or building society) - if you are permanently in your overdraft your internal score will be low meaning when you want to upgrade your account, get a credit card, loan, mortgage etc you're less likely to be successful.

Mulder00

Also, maxing out your overdraft puts you at risk of going over your arranged overdraft limit. Just one mistake will wipe out any interest gains you make, so if you really want to proceed with that, make sure you manage this very carefully.