Interest while money is being transfered

khalid

Hi fellow MSExperts,

I was just wondering if you lose any interest on money that is being transferred from one bank to another. I transfer £500 from my ICICI HiSave account (6.41%) to my A&L Premier Direct Current Account (6.5%) each month.

Do I lose interest on the money while it is being transferred?

If not, who do I get interest from during this period of transfer?

Many thanks!

baby_boomer

You get no interest during transfers from one bank to another.

It can therefore be an advantage to hold a savings account at the same institution where you hold your current account.

debbie42

khalid wrote: »

Do I lose interest on the money while it is being transferred?

If not, who do I get interest from during this period of transfer?

Yes, you lose interest whilst the cash is in limbo. For my two regular savings accounts, I transfer it in cash as my b.socs are both in my village. The exercise does me good and I'm a bit of a skinflint!

Lloyds did have a sales pitch a while back where you could start earning interest on a cheque as soon as you'd paid it in. I think the interest rate was so naff on that account that the "benefit" wasn't that great.

DeepSporran

It's true that in general you don't get any interest while the transfer is taking place - but that's because it's usually a BACS transfer that gets the money across. So you usually lose 2 days interest (at least) - that would be if (for instance) you asked for the transfer on a Monday morning. The money would get no interest for Monday and Tuesday, but by Wednesday it would have arrived at the target account and would start earning interest again. Note that for some accounts it takes longer, so you may lose more than 2 days' worth.


However .... if the transfer is done by direct debit (which might be the case if the OP was transferring FROM A+L Premier TO ICICI ) then no interest is lost at all. The money comes out of the source account and arrives inthe target account on the same day.

For most accounts, you don't get the choice of using direct debit rather than BACS transfer, but for payments INTO ICICI FROM your nominated current account (e.g. the A&L Premier) you do have this choice.

All this will become academic some time next year though, once some important changes to the bank transfer systems take place. All transfers (whether direct debit or BACS transfer) are going to become same-day transfers, and no interest will be lost.

Hope this helps.

purch

you lose interest whilst the cash is in limbo

The Banks need to make money somewhere........:eek:

.....that way they have something to lose on the Capital Markets :mad:

khalid

DeepSporran wrote: »

It's true that in general you don't get any interest while the transfer is taking place - but that's because it's usually a BACS transfer that gets the money across. So you usually lose 2 days interest (at least) - that would be if (for instance) you asked for the transfer on a Monday morning. The money would get no interest for Monday and Tuesday, but by Wednesday it would have arrived at the target account and would start earning interest again. Note that for some accounts it takes longer, so you may lose more than 2 days' worth.

However .... if the transfer is done by direct debit (which might be the case if the OP was transferring FROM A+L Premier TO ICICI ) then no interest is lost at all. The money comes out of the source account and arrives inthe target account on the same day.

For most accounts, you don't get the choice of using direct debit rather than BACS transfer, but for payments INTO ICICI FROM your nominated current account (e.g. the A&L Premier) you do have this choice.

Read ICICI HiSave account FAQs and they use a BACS system of transfer. They also do CHAPS (?). However, they charge customers for this method of transfer.

There is a Direct Debit option if you set up a recurring transfer. As I am transferring money monthly, I think this is worth setting up.

DeepSporran wrote: »

All this will become academic some time next year though, once some important changes to the bank transfer systems take place. All transfers (whether direct debit or BACS transfer) are going to become same-day transfers, and no interest will be lost.

Hope this helps.

Do you know when this will come into effect?

Milarky

debbie42 wrote: »

Yes, you lose interest whilst the cash is in limbo. For my two regular savings accounts, I transfer it in cash as my b.socs are both in my village. The exercise does me good and I'm a bit of a skinflint!

Lloyds did have a sales pitch a while back where you could start earning interest on a cheque as soon as you'd paid it in. I think the interest rate was so naff on that account that the "benefit" wasn't that great.

The Lloyds TSB rate is 4.25% (provided £1000+ is credited monthly) I am currently working up a system to take advantage of this thus:

- Write a cheque against AN Other account on Thursday (up to £1000)
- Repeat if required Friday

- Cheque 1 is drawn on Monday (4 days later)
- Cheque 2 is drawn on Tuesday

result 1) 4 days 'double interest'

- Cheque 1 'clears' on Wednesday - it can now be withdrawn or transferred
- Cheque 2 'clears' on Thursday

(it gets better...)

-Cleared Cheque 1 amount can be deposited instantly on Thursday into Egg internet savings (5.75%) but does not leave Lloyds until Monday - taking at least two working day

result 2) 4 more days 'double interest'

Thus one cheque deposit can earn an 'extra' 8 days at 4.25% plus 4 days at 5.75% - although it only earns 4.25% for three days (Mon Tue Wed) when it could be earning c. 5.5 - 5.8% in savings account linked to current account.

..also this process results in the movement of balances in one direction only.

I have a linked Egg account with card, so can withdraw £500 daily to move money back (This card account is no longer available) but it is perfectly possible to transfer back to the source account from Egg using BACS

On this basis One cheque can still generate:

11 days in Lloyds at 4.25%
2 days in Egg at 5.75% (i.e subtracting the 2 days lost by BACs)

and loses perhaps 3 days at 5.75% (i.e. after it has been drawn and before it clears and can be moved again)

So thats still a net 9.67 days at 4.25% .....

ALSO they say that payments made from the account will continue to earn interest until they would reach their destination. So standing orders for the same 'date' each month - which can go any day of the week, Monday to Friday - will earn between 2 and 5 days interest after payment (or at least that's the way I read it) This will be very useful until those faster payments finally arrive....

DeepSporran

khalid wrote: »

.... There is a Direct Debit option if you set up a recurring transfer. As I am transferring money monthly, I think this is worth setting up.

I believe this is only available for transfers into ICICI - your original posting suggested it was transfers out of ICICI you were interested in. You would need A&L (the target account) to raise a direct debit on ICICI to get the money to go in that direction, and I don't think A&L will do this.

khalid wrote: »

Do you know when this will come into effect?

Originally they had hoped to get it in place by November 2007 (i.e. by now) but it has been delayed until May 2008 at the earliest

- see APACS press release:

http://www.apacs.org.uk/media_centre/press/08_14_07.html


- and some background on why it has been delayed:

http://www.computing.co.uk/computing/news/2197211/faster-payment-scheme-slows-3415425

debbie42

Milarky wrote: »

-Cleared Cheque 1 amount can be deposited instantly on Thursday into Egg internet savings (5.75%) but does not leave Lloyds until Monday - taking at least two working day

result 2) 4 more days 'double interest'

I confess I couldn't follow all of your post, but doesn't the above rely on Egg also applying interest before the cheque has cleared? Or am I missing the point? Quite possible as my brain is a bit worn out at the moment, and needs some sleep...

Lokolo

If you do a bank transfer, Egg also pays interest on money that is transferring. i.e. you transfer from HSBC account, £500 on Monday. It will take 3 days to come out of HSBC but you will start earning interest from the Monday with Egg

agent_orange_2

khalid wrote: »

Hi fellow MSExperts,

I was just wondering if you lose any interest on money that is being transferred from one bank to another. I transfer £500 from my ICICI HiSave account (6.41%) to my A&L Premier Direct Current Account (6.5%) each month.

Do I lose interest on the money while it is being transferred?

If not, who do I get interest from during this period of transfer?

Many thanks!

Are we talking about £0.30pence interest on this amount of money.