Using an overdraft to your advantage

r4tm

Hi all,
I'm going into university life in September, as are many others, and I have been thinking of some ways to try and raise as much cash as possible. When reading Martin's advice about Student accounts and student financing I had an idea which could, if it works out right, make me money for free.
I'm sure others have had this idea as well but I just want to make sure with all the experts here that a) it's possible and b) it's legal.

Basically the idea is that I take out the Halifax student account that allows a 0% interest overdraft upto £2,750.
At the same time I also take out a Halifax current account. After speaking with some people from Halifax, they assure me that there isn't a requirement of regular funding in order to keep the current account open.
Now I've got 2 current accounts open at the same time, which would seem pretty pointless. But I also take out a high interest savings account from Alliance & Leicester and bolt that onto the side of my Current account from Halifax.

I then go fully overdrawn on my student account and place the £2,750 into my high interest savings account. I then just leave that in there to build up interest over the quarterly periods. After that I can basically just leave my student account fully overdrawn for however long because its 0% interest.
Due to the fact that I don't need regular income to keep my current account active, I can then use this as my main banking account in which to place my student loan and do all my regular banking.

Provided I don't need to use any more money than my student loan allows, I can effectively earn free money on the 0% interest overdraft from my student account.

The whole thing obviously requires you to stay on top of everything and make sure your in check with it all, but in theory it should work.

Any thoughts on the idea?

Stubert

I sort of do this in really simple terms. I use my current account and transfer all of the money out of it into my savings account, as the OD is interest free. Its work okay for me, but its a little confusing to stay on top of having one in huge minus and one in plus (well it has to be so one would hope...). I think you need to carefully budget and be think really carefully about paying money back when you have DD's going out and buying anything on yer debit card to ensure you don't go over your OD limit. Working out a budget as to what you actually can afford to spend is a really good idea to ensure you aren't just lumping money back into it when a bill goes out or do a bit of online shopping then realise you don't have enough for your accomodation etc when that bill comes round stored in your savings account.

I really need to draw up a budget for this year myself!

pixiedust_2

would it be worth dumping the OD money into an ISA instead, so that there's less temptation to spend (having to go the bank with a book to get money out makes it much harder than sticking your card in the hole in the wall!)? I know the interest wouldn't be quite so high, but you'd still be winning

Stubert

ISA isn't really very flexible, if you need to pay a large bill for instance you don't really have any access to the money so unless OP has got enough money already its a bit risky!

Broke_Student

r4tm wrote: »

Hi all,
I'm sure others have had this idea as well but I just want to make sure with all the experts here that a) it's possible and b) it's legal.

a) Yes it is possible and actually very common!
b) Yes it's legal. The bank is offering you an interest free overdraft and you are using it. Whether you spend the money or invest it is up to you.

The legality can get abit more complicated when you try opening more than one student account though as it may be against the banks terms and onditions to have a student account elsewhere.

Just to point out, Halifax will not offer you the full £2750 overdraft in the first year, despite what impression their adversing gives.

r4tm

pixiedust wrote: »

would it be worth dumping the OD money into an ISA instead, so that there's less temptation to spend (having to go the bank with a book to get money out makes it much harder than sticking your card in the hole in the wall!)? I know the interest wouldn't be quite so high, but you'd still be winning

Yeah I originally thought that this might be the way to go, but like Stubert says the ISA isn't as flexible and easy to use as the savings account from A&L. They've told me that I can get a book or a card to access my savings account and use ATM's to withdraw some money from them.

The legality can get abit more complicated when you try opening more than one student account though as it may be against the banks terms and onditions to have a student account elsewhere.

Just to point out, Halifax will not offer you the full £2750 overdraft in the first year, despite what impression their adversing gives.

Yeah I've noticed that when questioning some of the people at the branches which is mainly why I've gone for the current account as well just so that I don't risk getting into any legal trouble.

I've read about Halifax not giving the full overdraft straight away, but I plan on bugging them quite a bit over the course of the year to get the full OD in order to maximise my Interest.

Thanks for that I'm basically just looking for someone to give me some sort of green light to say "yeah it's fine to do that" and from what you've just said that pretty much gives me all the assurance I need. Thanks guys. :beer:

shaund316

How much money would this earn roughly?
You've intrigued me, I wanna do it now!

rustypenny

You could also take out a credit card with an introductory rate of 0% on purchases such as the Halifax One online special with 12 months free purchases and use this card to pay for things and save money to pay the debt of in 12 months time in a high interest rate account to earn even more interest for nothing.

latha

Hello!

We applied for a student overdraft with Halifax and were only offered £500 instead of the full £2750 as advertised. Any ideas why?

Badger_Lady

That's what they do, I'm afraid - start you off small... in fact it's quite common for you to only get £500 for the first year.

You can then apply for gradual increases to your overdraft limit - each time, you need to give a reason for the increase e.g. "repairs to the car" and they sometimes make you fill out an income / outgoings budget sheet.

The adverts will say "a limit up to £2750" because that's the most you could ever possibly get at that rate, but it might take you 3 years to get it...