Using a fee-free overdraft to save money

freeform

I apologise if this has been covered previously. I've had a quick scout around the forum, but there's so much information it's easy to miss something.

I'm in the process of moving to an account with a fee-free overdraft for 12 months. I tend to use my overdraft and previously incurred fees, so the fee-free deal will be valuable from that standpoint alone, but i'm also wondering about the following....

I know it's not what you're supposed to do, but does anyone have experience of using some of this 'free' money to help build savings i.e. each month take a few hundred from the free overdraft and transfer it to a savings account (not with the same bank as that would be obvious).

My aim is to learn to live within my means and as much as possible not use my overdraft for living expenses. If I could also use it to help me build some savings that would be great.

Any thoughts, feedback on this would be much appreciated

jonesMUFCforever

If you have incurred charges before for exceeding overdraft facility then your priority should be not to make the same mistake again.

I also do not agree that your savings account should not be with your current account provider in this case as if you need funds in a hurry to meet an unexpected payment you need transfers between accounts to be instant not 3 days.

freeform

thanks for the reply. the fees were (mostly) for using the overdraft rather than exceeding i.e. the interest charges for using the overdraft.

i was intending to have a savings account with this bank to use as you suggest, but just not depositing any money taken from the overdraft into it.

YorkshireBoy

If you used £1,000 of your (interest) free overdraft, you'd be lucky to get around £40 interest in a savings account...coincidentally around the same amount as one failed payment charge.

Unless you're extremely well orgainsed, I'd advise against it and just use the overdraft for what it was intended for...emergency use only.

realaledrinker

Sounds like you are looking at a smile account?

Whatever, a 'fee free' overdraft is not the same as an 'interest free' overdraft. You will still pay interest at a higher rate than anything you will make on a savings a/c.

benf90

I have a student account with a 0% interest overdraft and the majority of that was transferred into an ISA with the same bank (literally only a few days after the accounts were opened). I'm basically using their money to earn interest tax free.

I only pay a couple of Direct Debits from that account (which my student loan more than covers). I actually have a normal (not student) account with another bank which I've been with longer, I have my wages from my part time job paid into it and use it for what I'd call my regular banking etc.

I also use a cash back credit card which is paid in full each month which also helps me to keep my money in a savings account for longer. I personally feel that if you're going to be in control of your accounts and its financially worthwhile then go for it.

But, if you don't trust yourself to take the time in planning and checking your accounts regularly then you should ask yourself if it's worth the risk of being hit with charges etc.