taking advantage of alliance & leicester overdraft

ramborai1987

alliance and leicster have changed their overdraft rules to 3 pound a month.

is there a way of taking advantage of this. i mean does it mean we can all take an overdraft out with them and put it in a high interest savings a/c and maximise our interest?

Milarky

ramborai1987 wrote: »

Alliance and Leicester have changed their overdraft rules to 3 pound a month.

Can you explain what the ''£3 a month'' is referring to?

Actually, I've just found this: Premier 21

0% EAR typical (variable) overdraft (for aged 18 and over, subject to status, £3 per month fee if overdraft used) . Maximum credit limit £2,500

So it looks as those you can't take advantage of the 'free' money since a typical overdraft will be a lot less than £2500. If it is any less than £600 the fee wipes out the interest at 6% net

However the Premier 21 gives 10% in credit interest for just over a year (I wonder if they will roll that out to a long fixed end date once the 31 October comes and goes?) and all you have to do is pay in £250 per month. That makes it almost a an alternative regular saver - and one suited to a young person with £1000+ savings (because they won't be using this as a current account)

ramborai1987

hxxp://news.bbc.co.uk/1/hi/business/6992975.stm

noh

Actually its £5 a month for the other accounts.
If you had a £1000 agreed overdraft it would cost you £60 for a year which is 6%. If you can get 6% after tax by investing the £1000 elsewhere then its worth doing. Going to be very difficult to find somewhere though!

Nigel

Milarky

Ah! From the article, the way to take advantage (assuming you aren't on an existing 0% overdraft deal) is to have a sufficiently large overdraft and run up the max charge of £5 (10 days time 50p) possible and run it constantly. Note this is for use of your 'authorised overdraft'.

It won't work on overdrafts less than £1000 however. And A&L overdrafts are smaller than most banks IME. Therefore only someone granted the biggest possible overdraft could turn a profit.

I'm on an existing 0% overdraft offer so I assume that the changes announced will simply change the 'go to' conditions for when these offers expire.

Actually they make a claim of simplicity but they are charging 'super interest' for being a few £ overdrawn - and clearly that is a chip in the concept of free banking.

noh

Yes it means if you are going to use your overdraft facility its more cost effective to use it all and make sure its as big as possible.
I too have a new premier account with a free overdraft of £1000 which I have moved into their direct saver account paying 6.3%. Fund the account with £500 a month £250 into the regular saver and £250 into the direct saver. £50 quidco for opening the Premier account and another £20 from quidco for opening the Direct Saver account even though not listed.

Nigel

Lavendyr

Noh are you not a taxpayer then? Because remember that saver is 6.3% gross, so you're only earning around 5% interest net if you pay tax.

noh

Lavendyr wrote: »

Noh are you not a taxpayer then? Because remember that saver is 6.3% gross, so you're only earning around 5% interest net if you pay tax.

I realise that. The key thing is the 1000 deposit is funded from a 0% overdraft. So its 5.04% of £1000 for nothing. (the overdraft is free for 1 year for new accounts)

Nigel

Lavendyr

Ah, got you, I thought you meant that you were funding it with a 50p-a-day overdraft.