Managing current account to avoid charges and interest

peter021072

To be safe of not going into debt and incurring charges and interest, I tend to keep to a large enough balance to allow for unexpected bills. Unfortunately, this means the balance isn't earning interest.  Presumably if the account went into debt and was credited to bring it into positive territory on the same day, before midnight no charges or interest would apply?

It's not straightforward though, because I notice some credits and balances seem to appear on my balance during the hour before midnight but with the following day's date.  So if that was a debit driving me into a negative balance would I be able to credit the account the following day (the same date it's allocated to) and avoid charges and interest? 

flaneurs_lobster

Don't know how large your potential negative balance might be but would having a £250 interest-free overdraft facility help?

Available (subject to status) with a First Direct current account (and a 7% regular saver account too).

HillStreetBlues

With my Natwest account I get messages when I enter my overdraft, I just transfer money in to avoid any charges.

friolento

There are a couple of current accounts that pay a bit of interest if this would help you keeping a higher balance - Kroo and Zopa.

If you want to avoid going overdrawn, you need to have detailed budgeting records. If it still happens, you usually have until the end of the bank’s day to settle your account and avoid charges. Different banks have different end of day times - for example, with Santander it’s 20:15, and they send a text by 08:30 on the day to tell you that. I regularly let my Santander account go into an overdraft overnight and then settle it in the morning. 

PRAISETHESUN

I have a few accounts where I shuffle money around by SO to meet the monthly pay in requirements. Pretty much every time they fire off out of order, so my accounts go overdrawn for a few hours during the day until the SOs are attempted again sometime in the afternoon. I get a SMS or an app alert when this happens so I could make a manual payment if I wanted.

As long as the balance returns to a positive balance (or in my case, a zero balance) by the end of the day then OD fees do not get charged. I'm unsure what would happen for payments marked for the following day, but I suspect you should be okay to top up the balance the next day. For the sake of one day's interest vs. 1 day's OD fees, I think it'd be safer just to ensure there is sufficient money to cover the bills the day before they are due.

peter021072

I suppose the question is if bills come in around midnight as they do, how are they recorded, the day before midnight or the day after midnight.  In the latter case you have 24 hrs to credit the account, in the former case the charge is lodged at midnight and there's no way of crediting the account in time. 

I'm usually very careful with low balance alerts on the account, but I won't see this until the following morning. I could easily get caught out if it's charged just before midnight when I wouldn't see them in time.

AmityNeon

peter021072 said:

I suppose the question is if bills come in around midnight as they do, how are they recorded, the day before midnight or the day after midnight. In the latter case you have 24 hrs to credit the account, in the former case the charge is lodged at midnight and there's no way of crediting the account in time.

I'm usually very careful with low balance alerts on the account, but I won't see this until the following morning. I could easily get caught out if it's charged just before midnight when I wouldn't see them in time.

Scheduled payments are processed overnight after the previous day's account balances have been closed off, hence why they are posted with the following day's date if you happen to notice them appear in the late evening just before midnight.

Transactions that occur before midnight but after the daily cut-off point (each bank has their own time and you haven't mentioned your bank) are treated as having taken place the following day. You can even make your own withdrawal after the cut-off point and transfer funds to a different bank with a later cut-off and earn interest twice for the same day (but don't do this intentionally, especially not regularly).

Rob5342

Have a look at switching to Monzo. Direct debits show up as pending a day or two before they are actually taken. Some credits like salary payments and child benefit show up as pending a day or two before they are credited, and you can claim them early at 4:00 the day before they are due to be paid in.

Most of the time you know exactly how much direct debits will be as you are told in advance. I have a spreadsheet that I put them all on so I know how much to put in my Monzo bills pot when I get paid. That covers me 99% of the time but seeing the pending direct debits in Monzo is useful on the odd occasion when I make a mistake with the start date of something. 

penners324

Wouldn't an account like Starling or Monzo be best?
They show any DDs and SOs in the transaction list the day before they go out. And send notifications of this.

peter021072

AmityNeon said:

Scheduled payments are processed overnight after the previous day's account balances have been closed off, hence why they are posted with the following day's date if you happen to notice them appear in the late evening just before midnight.

Transactions that occur before midnight but after the daily cut-off point (each bank has their own time and you haven't mentioned your bank) are treated as having taken place the following day. You can even make your own withdrawal after the cut-off point and transfer funds to a different bank with a later cut-off and earn interest twice for the same day (but don't do this intentionally, especially not regularly).

My bank is Santander

If I've understood correctly, providing I ensure the balance of the current account is showing a credit by the cut off time (every day), I shouldn't get charged for going into temporary debt.

Rob5342

peter021072 said:

AmityNeon said:

Scheduled payments are processed overnight after the previous day's account balances have been closed off, hence why they are posted with the following day's date if you happen to notice them appear in the late evening just before midnight.

Transactions that occur before midnight but after the daily cut-off point (each bank has their own time and you haven't mentioned your bank) are treated as having taken place the following day. You can even make your own withdrawal after the cut-off point and transfer funds to a different bank with a later cut-off and earn interest twice for the same day (but don't do this intentionally, especially not regularly).

My bank is Santander

If I've understood correctly, providing I ensure the balance of the current account is in credit by the time I go to bed at 23:00 (every day), I shouldn't get charged for going into temporary debt between that time and 23:00 the following day

On page 10 it says that you won't get charged if you make payment by the cut off time, but I can't see what that is. If a payment would take you into an unarranged overdraft then they might decide not to make the payment. Switching to Monzo or Starling would be very useful as you could see the pending direct debits the day before they were taken, or even earlier.

https://www.santander.co.uk/assets/s3fs-public/documents/managing_your_money_bank0490jan20h.pdf.

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