Overdraft money placed in savings account to claim interest? Plausible?

Diego_Francis

Hello all, here with another dumb question. 

Scenario, 

You have a current account with an overdraft limit of £250
You also hold a savings account with that same bank provider. Let's say it pays 2% interest on a monthly basis.

If one were to transfer a £0.00 current account plus £200 overdraft into said savings account at the start of the month and then returned it back by the end of the month.

A ) would you be paid interest on that money for that duration? 
B ) would you avoid incurring an overdraft fee? 
C ) would this work or because it's technically not your money but the banks, you would get any interest? 

Just a crazy thought I had and can't find it anywhere on the net so here I am to brighten your day with another dumb perspective from a pleb like me. 

Thanks

WillPS

Presuming you're meaning a 0% overdraft then yes. You're describing a (very small) form of stoozing.

Nothing to stop you doing it but remember that use of an overdraft is often seen by lenders as a sign of financial distress. I would suggest the cons outweigh the gains in this case - especially if the interest on that £250 is only £5/year.

Middle_of_the_Road

Diego_Francis said:

Hello all, here with another dumb question. 

Scenario, 

You have a current account with an overdraft limit of £250
You also hold a savings account with that same bank provider. Let's say it pays 2% interest on a monthly basis.

If one were to transfer a £0.00 current account plus £200 overdraft into said savings account at the start of the month and then returned it back by the end of the month.

A ) would you be paid interest on that money for that duration? 
B ) would you avoid incurring an overdraft fee? 
C ) would this work or because it's technically not your money but the banks, you would get any interest? 

Just a crazy thought I had and can't find it anywhere on the net so here I am to brighten your day with another dumb perspective from a pleb like me. 

Thanks

Technically possible, although you would only make around 33p each month, assuming no charges are made for the overdraft. 

MorningcoffeeIV

A) yes

depends on the terms of your OD

C) See A) and .

But for a return of less than £4 for a year of shuffling money around, you'd be better off looking for dropped coins in the street.

CliveOfIndia

Yes, in theory this would work - as long as there are no fees or interest for using the overdraft.  But is it really worth the hassle for such a small gain?

Perhaps more importantly, regular use of an overdraft is viewed very negatively by any future lender.  So you could be shooting yourself in the foot somewhat if you plan on taking out any more credit in the near future - loans are likely to be offered at a higher interest rate, your choice of credit cards may well be restricted, and it could seriously impact any mortgage application you may be thinking of making.

datz

Diego_Francis said:

If one were to transfer a £0.00 current account plus £200 overdraft into said savings account at the start of the month and then returned it back by the end of the month.
...
B ) would you avoid incurring an overdraft fee?

If your overdraft is interest-free, you can generate a small profit (probably not worth it in the scenario you describe and the bank may take a negative view of this sort of overdraft stoozing).

If your overdraft charges you interest, then this will far exceed any benefit from stoozing it. Not sure what you mean by 'returning it by the end of the month' - the interest will be calculated daily.

General_Grant

Diego_Francis said:

Hello all, here with another dumb question. 

Scenario, 

You have a current account with an overdraft limit of £250
You also hold a savings account with that same bank provider. Let's say it pays 2% interest on a monthly basis.

If one were to transfer a £0.00 current account plus £200 overdraft into said savings account at the start of the month and then returned it back by the end of the month.

A ) would you be paid interest on that money for that duration? 
B ) would you avoid incurring an overdraft fee? 
C ) would this work or because it's technically not your money but the banks, you would get any interest? 

Just a crazy thought I had and can't find it anywhere on the net so here I am to brighten your day with another dumb perspective from a pleb like me. 

Thanks

A)  You would receive interest on the savings account  balance for the number of days it was in the account.  And that's not 2% of £250 every month.

B   Taking money out of the current account at the start of the month, being overdrawn for most of the month, and paying the money back at the end of the month (so zero balance at start and end but debit of £250 for most of time) doesn't avoid paying charges for having used the overdraft.  

C)  It wouldn't work because you would be charged more for the overdraft than receive from the savings.   Unless, as assumed by some other posters, you had an interest free overdraft of at least £250.

propertyrental

why not pit the money in an instant access saver earning 3%? 

Of course, even 3% of £250 is only £7.50 each year.

Is your £250 overdraft fee free and interest free?

GenieBoy

Draw off the overdraft and stick it all on black. Winner.

phillw

MorningcoffeeIV said:

But for a return of less than £4 for a year of shuffling money around, you'd be better off looking for dropped coins in the street.

You can do both.