Managing current account to avoid charges and interest

AmityNeon

friolento said:

AmityNeon said:

friolento said:

AmityNeon said:

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 showing a credit by the cut off time (every day), I shouldn't get charged for going into temporary debt.

Yes. To put it simply, no automated bank transfer is going to put your account into overdraft later in the evening (only you can do that with a manual payment/withdrawal). It's not something you need to worry about so just clear the overdraft in the morning. Many here do just that.

I have tons and tons of automated payments (SOs and DDs) that regularly put me into an overnight overdraft.

Yes, overnight after the cut-off so no overdraft fees are charged. The concern was whether an automated bill payment would be taken later in the evening before the cut-off and thus leave very little time to clear the overdraft to avoid being charged fees.

The rules for overdraft charges are the same for automated and for manual payments.

I'm not sure what you think suggested the rules could be different. The distinction I was highlighting was that manual payments can be made at will, just before the evening cut-off and therefore risk the account incurring overdraft fees, whereas automated payments are never scheduled to leave just before the evening cut-off so the OP need not worry.

peter021072 said:

Perhaps I should apply for an overdraft even if I don't use the credit for longer than a fraction of a day to avoid the chance of a bounced payment.

You could do this, although direct debits only truly bounce once all attempts throughout the day have failed (early morning and early/late afternoon), and then alternative payment arrangements must be made.

jbrassy

I personally use First Direct as my main bank account. As has already been mentioned, it comes with a £250 0% interest overdraft which is quite useful for these situations. In addition, when a large direct debit is taken from my account overnight and I slip into my overdraft, I get a text message in the morning telling me I'm in my overdraft. If I'm over the £250 0% limit, the text says I have until 23:45 that day to add funds to the account and avoid charges. I think it generally works quite well.

friolento

jbrassy said:

I personally use First Direct as my main bank account. As has already been mentioned, it comes with a £250 0% interest overdraft which is quite useful for these situations. In addition, when a large direct debit is taken from my account overnight and I slip into my overdraft, I get a text message in the morning telling me I'm in my overdraft. If I'm over the £250 0% limit, the text says I have until 23:45 that day to add funds to the account and avoid charges. I think it generally works quite well.

A £250 0% overdraft is very useful if you don't need much more than £250. It wouldn't be much use if you want to, say, use it on the day you want to feed dozens of Regular Savers, to the tune of £7,000+.

The cut-off time of 23:45 is superb, a lot better than my Santander 20:15. Not superb enough for me to switch to FD, though, not least as they wouldn't pay me to do so 

peter021072

If there's no charge for applying for an overdraught, which I think is the case with Santander, then surely it makes sense to have one, because there's always the chance of a mistake, or being ill, just plain forgetting.  Then the only loss is a days interest. The only downside of an overdraft I can think of (assuming we aren't planning to use it) is that it triggers a credit check.

penners324

Petriix said:

One trick is to move as many things as possible to be paid by credit card. That has two benefits:

1. you can earn cashback on everything
2. you only have to pay once per month

Keep a spreadsheet of when all your direct debits are going out and set standing orders to move the money from your savings in advance of the date. You should receive advanced notice of any payments going out, even ad-hoc DDs. If you can, try to move the direct debit dates to all be on the same day to make it easier.

Chase is a good place for instant access savings because you can easily set standing orders to go out directly from the savings. Otherwise, as mentioned above, Kroo pay reasonably good (but not great) interest on their current account so that's a good low maintenance option.

With all the bank switching I do, I'd be lost without my spreadsheet. It's a fun activity for the first of the month to set all the payments to arrive in the right accounts at the right time.

An even better and easier solution is to all DDs set to go out the day after payday.

Ie if you get paid on the last day of the month then DDs and SOs on the first.

It's so easy to implement and stops a lot of issues some people have with budgeting 

Rob5342

peter021072 said:

If there's no charge for applying for an overdraught, which I think is the case with Santander, then surely it makes sense to have one, because there's always the chance of a mistake, or being ill, just plain forgetting.  Then the only loss is a days interest. The only downside of an overdraft I can think of (assuming we aren't planning to use it) is that it triggers a credit check.

Yes they are useful as a backup in case of any mistakes, but generally speaking people should know exactly what is coming out and when over a month. 

Ballard

jbrassy said:

I personally use First Direct as my main bank account. As has already been mentioned, it comes with a £250 0% interest overdraft which is quite useful for these situations. In addition, when a large direct debit is taken from my account overnight and I slip into my overdraft, I get a text message in the morning telling me I'm in my overdraft. If I'm over the £250 0% limit, the text says I have until 23:45 that day to add funds to the account and avoid charges. I think it generally works quite well.

Oddly, my first direct account doesn’t have an overdraft facility. I’m not sure why as it used to have one but I changed from an offset to standard repayment mortgage a while ago and no longer have it. I did contact them about it but the answer they gave (which I don’t recall in any detail) meant that I didn’t bother applying. I don’t need it anyway. 

jimjames

peter021072 said:

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? 

Depends on the bank but with Halifax/BOS you have until around 2pm to credit the account and avoid charges. I keep my balance at a few pence and move money in every day to clear the negative balance.

where_are_we

I have an arranged overdraft with Santander and if it is entered into, I get a text alert (last one was 09.30) and I have until 8.15pm to pay enough money in to avoid being charged.

However if the payment request is larger than the arranged overdraft I get a text alert (the last one was 07.00), and to avoid overdraft fees I have to pay in enough money by 4pm. I had overlooked a large RS SO.

As long as you check your texts in the morning you are ok to transfer the money in time.

I keep a very small balance with Santander and have numerous SO`s and DD`s.

Having banking apps in your smartphone has made not incurring current account charges much easier.