Is this scheme for managing my student overdraft legal and viable?

mm04926412

I've noticed the 0% interest on student overdrafts and that has got me thinking into how I could take advantage of this that given my limited knowledge of finance I'd want a more educated second opinion on.

The general plan is that I open up several student current accounts, and so does my girlfriend, and we set up direct debits where two cash amounts are cycled around the current accounts to give the illusion that they are all being used actively and at the same time to ensure there's never a moment where one of us could cancel the direct debits and walk away with the money.

We will then use this system to negotiate overdrafts on all our accounts, and max them out to put the cash in easy access isa's, we will collect the interest in 4 years time and if we break up the direct debits will simply be set up between our own accounts instead.

Is there any reason I can't do this?

grumbler

You can have only one student account each.

And it's Standing Orders, not Direct Debits.
Also, cash ISAs pay pathetic interest nowadays, especially instant access.

JuicyJesus

That is, technically, lending fraud and will not be viewed positively.

Also, as grumbler says, you can only have a single student account.

Zanderman

Agree with grumbler:

• You're unlikely to be able to open multiple student accounts (and if you do manage it you may be at risk of some or all being closed, or reverted to ordinary accounts, if the bank realises you have lots of them)
  
  
• And ISAs (esp easy access ones) are not the best place, unless for the very very long term when rates might be higher and tax-free might make sense. At present interest rates are tiny for ISAs, and you can get 2 or 3 times as much from non-ISA accounts.

But those higher interest accounts are, largely, current accounts (TSB 5%, Nationwide 5%, Lloyds 4% etc etc) so you'd need even more current accounts - of a type that, as students with relatively low income, you may not be offered.

Last but not least, there is considerable risk if you split up acrimoniously. One of you could end up keeping it all and the other end up owing a lot! You are obviously aware of that risk already, but please don't underestimate it!

Westie983

also OD on student accounts are tiered so you dont get the full amount in the first year....

The likelyhood of getting more then one student account is hard as you have to declare that you dont have any others and most of the banks now request to have you student loan or funding paid into it...

its a dangerous game especially as you don't seem that stable in your relationship to mention splitting up!!!

Caladan

I'd also caution you against opening several accounts in a short period of time. Credit Reference Agencies will record this information, and semi-secret anti-fraud databases will probably be intrigued by the behaviour too.

Check this out for some interesting information:
http://www.nhunter.co.uk/faq/?secton=1

Essentially a largely unknown database that holds information on every application you make. You consent to it by confirming you're happy for 'Fraud Prevention' checks to be made