Faster Payments into Ulster Bank savings account & daily interest

Ulrich

Hi All,

I have a Loyalty Saver account with Ulster Bank that I use to store extra cash.
It calculates interest daily.
I noticed that sometimes my money transfers from another bank (HSBC) to Loyalty Saver are showed as made on a later day despite the money arriving to the account the same day.

It looks like despite the money being available the very same day (so I can transfer them to another bank, withdraw cash etc) they are not counted towards daily balance until the next business day.

Here's Ulster Bank's information on Faster Payments, the same applies if one receives money via Faster Payments (as I do).
They do not mention interest but I think it's pretty clear they pay no interest on money arrived via Faster Payment after 6.30pm or over weekends.

Can anyone explain me in layman's terms why I can see my money in the Loyalty Saver account almost instantly and can do whatever I want with them BUT they are not counted toward the balance when calculating daily interest? Is that something industry-wide?
It just sounds very weird to me.

wmb194

Ulrich said:

Hi All,

I have a Loyalty Saver account with Ulster Bank that I use to store extra cash.
It calculates interest daily.
I noticed that sometimes my money transfers from another bank (HSBC) to Loyalty Saver are showed as made on a later day despite the money arriving to the account the same day.

It looks like despite the money being available the very same day (so I can transfer them to another bank, withdraw cash etc) they are not counted towards daily balance until the next business day.

Here's Ulster Bank's information on Faster Payments, the same applies if one receives money via Faster Payments (as I do).
They do not mention interest but I think it's pretty clear they pay no interest on money arrived via Faster Payment after 6.30pm or over weekends.

Can anyone explain me in layman's terms why I can see my money in the Loyalty Saver account almost instantly and can do whatever I want with them BUT they are not counted toward the balance when calculating daily interest? Is that something industry-wide?
It just sounds very weird to me.

Weekend or after the daily cut-off. These vary by bank.

Malchester

I assume that the funds transferred in are listed on the next business day but are available immediately. In my Lloyds account I transferred £100 into it last Saturday and it was showing immediately in the available balance but listed in the transactions as Monday. However I could transfer the funds out straight away and the transfer out was included in the available balance but in the list of transactions it showed for Monday.

Hope that helps

Ulrich

Based on a couple of responses it is a common practice.
It makes no difference if one transfers money between current accounts.
However, it means up to 3 days of interest missing if transferring into a savings account.
That just does not sound right to me.

born_again

Ulrich said:

Based on a couple of responses it is a common practice.
It makes no difference if one transfers money between current accounts.
However, it means up to 3 days of interest missing if transferring into a savings account.
That just does not sound right to me.

Current accounts are live systems. Savings are not, so while funds show as being available, they are not actually there till the system updates.
Best way is to only transfer during the day (Mon to Fri) which will ensure the payments are fully there, rather than evenings or weekends/bank holidays.

Ulrich

born_again said:

Ulrich said:

Based on a couple of responses it is a common practice.
It makes no difference if one transfers money between current accounts.
However, it means up to 3 days of interest missing if transferring into a savings account.
That just does not sound right to me.

Current accounts are live systems. Savings are not, so while funds show as being available, they are not actually there till the system updates.
Best way is to only transfer during the day (Mon to Fri) which will ensure the payments are fully there, rather than evenings or weekends/bank holidays.

I see what you're saying but 1) why the system is up-to-date to show me the payment arrived but is not for calculating interest and b) why customers should care about that, especially if the bank does not clearly indicate impact on savings accounts? The only thing they say is about displayed dates - sounds really misleading to me.

wmb194

Ulrich said:

Based on a couple of responses it is a common practice.
It makes no difference if one transfers money between current accounts.
However, it means up to 3 days of interest missing if transferring into a savings account.
That just does not sound right to me.

It depends. For instance, a deposit made on a Saturday to a Santander savings account will earn interest from that Saturday.

Ballard

For funds deposited on working days, the bank will be able to earn interest in the market. At other times, this avenue isn’t open to them. As a result you’ll have access to your cash, but the bank won’t pay interest as they’re not earning anything themselves. 

Ulrich

wmb194 said:

Ulrich said:

Based on a couple of responses it is a common practice.
It makes no difference if one transfers money between current accounts.
However, it means up to 3 days of interest missing if transferring into a savings account.
That just does not sound right to me.

It depends. For instance, a deposit made on a Saturday to a Santander savings account will earn interest from that Saturday.

exactly.
By the way, are you talking about your experience (curious how you know it earns interest from Sat) or it's reflected in their T&Cs?
The thing is there is no direct mention of that in UB T&Cs, which creates grey area.

Ballard said:

For funds deposited on working days, the bank will be able to earn interest in the market. At other times, this avenue isn’t open to them. As a result you’ll have access to your cash, but the bank won’t pay interest as they’re not earning anything themselves. 

As others say, it depends. Not all markets are closed on weekends. And following your logic, one should only expect to earn interest 5 days out of 7 minus some odd UK(or global?) holidays.
It should be in T&Cs but looks like many banks don't bother themselves to do so.  

Ballard

You’re making up your own logic which isn’t related to reality.

When banks borrow and lend money ‘overnight’ on a Friday it’s until the next working day, so on a Friday it’ll be until Monday and they’ll pay or receive three days interest. You’ve also assumed that the dealing rooms of all UK banks will be active over the weekend. 

On your second point, it’s true that some markets, notably the Middle East, operate over what we class as the weekend. They won’t, however, be able to settle GBP transactions on Sunday as the banks where they ultimately hold their funds will be unavailable to make the required transfers.

This is also true over bank holidays. Banks are not able to settle USD transactions on 4th July, for example, as the banks in the States will be out partying.

TheBanker

Ulrich said:

Hi All,

I have a Loyalty Saver account with Ulster Bank that I use to store extra cash.
It calculates interest daily.
I noticed that sometimes my money transfers from another bank (HSBC) to Loyalty Saver are showed as made on a later day despite the money arriving to the account the same day.

It looks like despite the money being available the very same day (so I can transfer them to another bank, withdraw cash etc) they are not counted towards daily balance until the next business day.

Here's Ulster Bank's information on Faster Payments, the same applies if one receives money via Faster Payments (as I do).
They do not mention interest but I think it's pretty clear they pay no interest on money arrived via Faster Payment after 6.30pm or over weekends.

Can anyone explain me in layman's terms why I can see my money in the Loyalty Saver account almost instantly and can do whatever I want with them BUT they are not counted toward the balance when calculating daily interest? Is that something industry-wide?
It just sounds very weird to me.

I think this all because of how the Faster Payments system works.

The Faster Payments Scheme works on a Deferred Net Settlement basis. What that means in simple terms is that when you ask Bank A to make a payment (say £100) to an account at Bank B, A sends a message to B telling them to credit a certain account. It's just a message - they don't send any actual money. B act on this message and makes the funds available, normally immediatly. No money has actually moved, even though both account balances have changed. Bank A owes Bank B £100. There will be millions of other Faster Payments taking place creating debts between banks.

Three times each business day, the Faster Payments systems works out the net position for each bank (i.e. the total payments their customers have sent, minus the total payments they've received). Each bank then receives either a credit or debit to their Bank of England settlement account. For example, if A's customers have sent £100m of payments, and received £90m of payments, A will be debited £10m. If B's customers have sent £50m of payments and received £80m, B will be credited with £30m. This is known as settlement. For Faster Payments, settlement takes place three times on every business day. The last cycle of the day is in the early evening. I can't remember the exact time but it may be around 6:30pm.

Why does this matter? Because banks receive interest from the Bank of England on their balances, paid at the Base Rate. If your payment from A to B is processed before the last cycle of the day, B will earn the interest overnight. However, if your payment is processed after the last settlement cycle of the day (or at a weekend or on an English Bank Holiday), the money will remain in A's account and therefore A will receive the interest. From a customer perspective, the payment is part of B's customer's balance, and can be spent by that customer, but B won't actually receive the money until the first cycle of the following business day. 

It's up to banks to make a commercial decision as to when they pay interest, which should be explained in their Terms and Conditions and, for Payment Accounts, be aligned to the Payment Services Regulations. They also need to take into consideration various FCA rules. They should really apply the same logic to incoming and outgoing payments but I don't think they're under any obligation to.