Bank takes money for direct debit early, forecasting transaction

wittyusername637

Hi,

Hoping you can help me understand if this is normal...

Short version: My bank blocks the money for a direct debit on the working day before its due so I can't spend it, over a bank holiday weekend this can be several days early. The payment shows on my statement as the working day after the bank holiday weekend as expected. They call it a 'forecasting transaction'. Is this normal?

Full version:

I pay my mortgage by direct debit from my joint current account with B (part of Clydesdale/Yorkshire). I have an automated transfer that puts the funds in to cover the payment. When the direct debit date falls on a weekend or bank holiday the payment is taken on the next working day.

The payment date fell on the long Easter weekend so the direct debit should have been taken on Tuesday the 3rd on the same day the automated transfer would put enough money into the account to cover the payment. Indeed, according to my statement it was.

However on that weekend my partner tried to buy some groceries in Morrisons on the joint account but her card was declined.

It turns out this is because B blocks the amount of a direct debit transaction from the end of the business day before the payment is due. For the Easter weekend that means there is a full 4 days where I can't use money that is in my bank account despite my statement showing money in the account.

This seems crazy to me but many things that banks do seem crazy to me but turn out to standard practice.

I contacted B but they say it is normal and referred to it as a 'forecasting transaction'. I asked where I could find it documented and they said in the account tariff. I can't find anything there but in their T&Cs it says:

"Future dated payments may show as forecasted payments in or out at the end of the previous Business Day."

But this doesn't mentioned that money is blocked.

This makes budgeting hard as I have to transfer money to cover the mortgage early enough to account for bank holiday weekends.

Has anyone else had this problem? Does anyone know if all banks do this? Who's crazy - me or the bank?

badmemory

Halifax certainly do it & online banking shows them as pending transactions (on both current a/c & credit card) which reduce the available balance.

glider3560

wittyusername637 wrote: »

Has anyone else had this problem? Does anyone know if all banks do this? Who's crazy - me or the bank?

I know for certain that HSBC, First Direct and Metro Bank definitely don't do it.


If you don't like the way your bank works, vote with your feet and switch.

wittyusername637

I'd quite happily switch banks its just not easy to find out if they do this or not. It took some persistence to get an answer from B and I they don't even state it clearly in their T&Cs.


Thanks for the three banks to consider and one to avoid!

daveyjp

Always have a balance in the joint account which is greater than your largest direct debit?

boo_star

RBS and NatWest definitely used to do it, although it was their intention to stop doing it. I don't know whether they have or haven't yet.

It wasn't all bad though. When I was sending/receiving payments that utilised BACS in some way, I also got BACS payments into my account earlier.

Armorica

Not all banks do this.

You mention you've set up an automated transfer to cover the funds on the payment due. How have you done this - standing order?

Depending on the sequencing of processing... your bank may be avoiding the risk that your direct debit goes unpaid - because you balance is checked for that ahead of your automated transfer arriving.

In line with requirements, banks should check direct debits again later in the day - so it would still be paid but this is a more recent development.

Is the interest rate differential so high that you couldn't send your automated payment over the day before?

If it's a traditional standing order, this may only be possible on working days. However, some banks should allow set up of forward dated transactions that can be made on bank holidays.

The branch associated with the sort-code shows as BIRMINGHAM, LONGBRIDGE

wittyusername637

Yes it's a standing order. The direct debit always ends up being paid so I think they must check again after the transfer has gone in.


The interest rates aren't an issue to me. Its just a case of how I've got it set up makes sense for how I budget.


Thanks all for the comments, definitely going to switch bank accounts.

fozmcfc

boo_star wrote: »

RBS and NatWest definitely used to do it, although it was their intention to stop doing it. I don't know whether they have or haven't yet.

It wasn't all bad though. When I was sending/receiving payments that utilised BACS in some way, I also got BACS payments into my account earlier.

Natwest, no longer do it. They have changed their system now, so all monies are available until the day they are due to be debited.

It can be a good or bad thing, depending on how well you keep tabs on your bank account and/or if you always have monies available, it's not an issue.

Previous to it being changed, I saw quite a few people on Natwest social media and forums, unhappy they couldn't spend money due out on a Monday (or Tuesday after a bank holiday) over the weekend.

born_again

ZoeHillo said:

I lost a lot of money on such transfers two years ago. Now the Bank has to pay me interest for another 3 years.

How did you lose money? 

ZoeHillo

The Bank charged me too much commercial debt by mistake and put a fine along with a penny.