Daily interest and weekends

Shermo

I recently read an article about how some savers get screwed over if they transfer at the weekend as some banks don't start calculating interest until the Monday.

It got me thinking, given that most mortgages have interest charged daily, if your direct debit is for the 1st of the month, but that falls on say a Saturday, then will you pay more interest because they won't take the payment until the Monday?

I'm pretty sure it's the case and it seems to be a little unfair given the fact that the reason is because the banks don't process at weekends even though the funds are there, which is even more silly if your mortgage is with your current account provider...

Krash420

Hi Shermo,

I don't know of any bank that only gives you interest for weekdays and not for weekends. The Interest should be calculated on the cleared amount at the end of the day i.e. at midnight. As such even if you transfer on a weekend, as long as it gets there before midnight, you should get the interest. Generally Interest is calculated daily/

When it comes to Mortgages, there's a big difference. Many Mortgages have the interest calculated monthly, i.e it doesn't matter what day your payment falls on, the interest is counted as a months worth, and the payment is usually the first day after the interest is calculated. That said, not all mortgages are like that, and you'll need to see the t&cs to know how interest is calculated.

This in particular is true for how my parents Santander mortgage is calculated (monthly), meaning if anything they can make a few extra pence from having the mortgage payment in their account for an extra day or two., I can't vouch for all other mortgages and mortgage providers, but this is how I've seen it. (Note I have seen a mortgage provider also charge interest daily, in which case delaying payments will mean that you're charged a bit extra on that delay.

RavingMad

I'm with the HSBC and whilst I agree with what you're saying, the "extra" interest you pay that month would have been tacked on to the following month anyway. I can't see any savings to be had as my monthly payments aren't enough to change my daily interest.

anselld

Shermo wrote: »

I recently read an article about how some savers get screwed over if they transfer at the weekend as some banks don't start calculating interest until the Monday.

It cuts both ways. eg You can FP money out of Club Lloyds on a Saturday morning and return it Monday morning to gain interest elsewhere without losing any interest at Lloyds.

getmore4less

Any extra would be just on the capital part of the payment being a day or two late and maybe a bit of interest if daily compounding as well as daily interest.

Shermo

getmore4less wrote: »

Any extra would be just on the capital part of the payment being a day or two late and maybe a bit of interest if daily compounding as well as daily interest.

That's my point, I'm just trying to calculate the difference now and it seems over the term of years I actually makes a fair bit of difference for what appears to be really due to banks inability to take payments at weekends and bank holidays.

TrickyDicky101

Shermo wrote: »

That's my point, I'm just trying to calculate the difference now and it seems over the term of years I actually makes a fair bit of difference for what appears to be really due to banks inability to take payments at weekends and bank holidays.

It makes fack all difference if you pardon my French.

Thrugelmir

Shermo wrote: »

That's my point, I'm just trying to calculate the difference now and it seems over the term of years I actually makes a fair bit of difference for what appears to be really due to banks inability to take payments at weekends and bank holidays.

If you want to save interest then pay your mortgage earlier. Power is in your hands.

getmore4less

Shermo wrote: »

That's my point, I'm just trying to calculate the difference now and it seems over the term of years I actually makes a fair bit of difference for what appears to be really due to banks inability to take payments at weekends and bank holidays.

TrickyDicky101 wrote: »

It makes fack all difference if you pardon my French.

£100k @ 3% over 20years, your first payment is 2 days late.

Extra cost compounded over 20years is around 9p