Losing Interest When Moving Money

MatLoweRN

Apologies if this is a dumb question but I'm quite new to chasing the best savings rate but the recent succession of interest rate rises has re-kindled my enthusiasm!

When moving cash from one savings account to another you usually have to do this via your nominated bank account.  (Or at least I do.)
The problem is that this can take time.  I am moving money from Charter to Marcus but the transfer time for Charter to my nominated account is by COP the next working day or two days later if after 3pm! Then there is the time taken to move the money out of the nominated account again.  Additionally on a weekend there are further delays!
So, my question is: is the interest lost while waiting for the money to be moved out cancelling out the benefits of moving it to a better paying account unless the difference in rates is substantial?

To compound the problem, Lloyds (my nominated account) only allows 25K per day to be moved meaning it takes me four working days.  I am aware of CHAPS payments but I know this incurs a charge which once again might cancel out the potential interest increase.

It would be interesting to know how the more seasoned rate chasers approach this.

Thanks

rothers

In relation to £25k max by Lloyds, the Halifax will let you do much more if you visit a branch and take ID. Lloyds may too?

redpete

Let's assume you are moving £85000, and it's going from an account paying 2.1% to another account paying 2.55%, and that you plan to leave it there for 6 months.

You will earn approx. £190 extra in Atom for that 6 months.

If you lose 4 days' interest while the money is being transferred, this is approx. £19.

Whatever the amount you are transferring, in this example you still gain 90% of the additional interest from moving the money.

refluxer

There's not a lot you can do about this if you're determined to chase the very best rates, particularly as a lot of the banks who offer those rates are of the next-day, Monday to Friday type and many also require you to have a nominated account, meaning you have to go via your current account which not only adds a step, but also the potential for loss of interest for any time the money sits in that current account.

Not only will these different banks have different time scales for withdrawals and deposits, but they will also have different daily withdrawal limits and may also have different policies about precisely what day an account starts earning interest from a deposit so 'doing the maths' would be pretty difficult considering the variables involved, but I can't imagine the potential loss of a day or two's interest would make enough of a difference for a move not to be worth it.

One way you could mitigate any potential loss of interest is to try to favour the banks who do relatively instant transfers 24/7 (eg. Atom, Tesco, Marcus, Chase etc) or, when moving away from a next-day, Monday to Friday bank, make your withdrawals towards the start of the week (and not on a Friday afternoon !)

refluxer

MatLoweRN said:

To compound the problem, Lloyds (my nominated account) only allows 25K per day to be moved meaning it takes me four working days.  I am aware of CHAPS payments but I know this incurs a charge which once again might cancel out the potential interest increase.

I don't think this actually will be compounding the problem though ? If you transfer money in a staggered manner, then it will still be subject to the same process (time-wise) as if it was transferred in one go. You would just need to transfer the money into the Lloyds account from the originating account £25k/day and then straight out again on consecutive days, rather than transferring the whole amount into the Lloyds account and it having to sit there for any length of time while waiting to be transferred, due to the daily limit.

If you move money often, one option could be to open a current account with a higher limit. My bank (Barclays) for example have a £50k daily external payment limit. Large payments to a new account are quite likely to trigger a bank's anti-fraud measures, which is another aspect to bear in mind when it comes to switching accounts often.

I have never used CHAPS when moving larger sums between bank accounts - I'm not sure I can see the need for this and the cost would definitely take quite a while to recuperate.

Hal17

rothers said:

In relation to £25k max by Lloyds, the Halifax will let you do much more if you visit a branch and take ID. Lloyds may too?

Yes if you visit a Lloyds branch with ID they will transfer whatever you request.

Millyonare

This is one reason (of several) why "speed" and "size" are so important for modern banking. Instant withdrawal and instant pay-in (within seconds) of bigger sums (£50k+) will lose little or no interest. Slow pay-out and pay-in can lose up to 5 days of interest. If you ditch and switch multiple times a year, that forgone multiday interest soon adds up. I try to avoid those fossil banks, unless they have a stunning % rate.

EthicsGradient

A single day's interest on the top easy access account is now about 0.0069%. So if you lose that for one day, and your new account pays, say, 0.3% pa better interest than your old, you'd need to keep it there for 0.0069/0.3 * 365 = 9 days to come out ahead.

So unless you know you can do a switch without losing a single day's interest, it's not worth moving in and out of accounts every week. Doing it every couple of weeks, if you know it'll only be one day lost, gains you a tiny amount.

propertyrental

Open a nationwide c/a and use that as your nominated bank. They limit transactions to £10K per transaction (not per day). It's a faff but you can transfer £85K in 9 separate transactions all on the same day.

Band7

propertyrental said:

Open a nationwide c/a and use that as your nominated bank. They limit transactions to £10K per transaction (not per day). It's a faff but you can transfer £85K in 9 separate transactions all on the same day.

There are banks with £100k/day limit for online payments, and several also have higher limits for telephone and Branch banking

wmb194

If you have Barclays Premier Chaps payments are free. Where possible, you could also consider using cheques.