'Investing' student overdraft ... a good idea?

Poorer_student

(Please excuse my ignorance!)

I've heard some talk of people investing some or all of their student overdraft into a separate savings account, presumably in order to generate some interest to help pay off the debt. Is this a good idea? Do high street banks allow you to have additional savings accounts with their rivals? Would it be possible for example for a Natwest or HSBC customer to invest some overdraft 'ethically' with the Co-op?

Lavendyr

You can have additional savings accounts wherever you like. You can also have additional current accounts in most usual cases, although many student account T&Cs require that you only open one student account (you can still open other current accounts, just not ones that are specifically for students).

If you're going to invest it anywhere, put it in a high-interest account. I'd recommend you open a mini cash ISA such as NS&I Direct ISA and plonk it in there, that way you will get the highest rate of interest and it will always be tax-free, whether or not you go over the threshold this year, plus you would not have to declare that interest as income on your LEA finance applications.

influence

I guess it is fine so long as you don't use your overdraft to invest in something that you will lose your capital. Otherwise, it will become a big liability in your balance sheet at the end of the day.