Direct Debit Help

Sammz

Just wanted to check I'm not missing anything and that I won't get caught out. My pay is now getting paid on the last working day (instead of 26th). I transfer money from my main account in to a "bills" account and all my bills are paid by direct debit. So ...

I will get paid on the last working day
Money gets transferred to bills account on the 1st of each month
Various direct debits come off over the first few days of the month

I have tried to get them all set up for the 2nd/3rd of the month but my mortgage is first working day. Will this be ok? Both accounts are with the Clydesdale Bank if that makes a difference.

Mikeyorks

Sammz wrote: »

Will this be ok?

Probably not. What happens when the 1st of the month is a Sat / Sun? Do the Clydesdale run their systems over a weekend .. as most don't? So the transfer to your 'bills' account won't happen until the Monday - when the DD for the Mtge is due.
In fact most Banks require that money for DDs due out on the Monday - are in the target account by close Friday.

Either move your accounts to Halifax - which would work for you as they run systems 7 days. Or get your Mtge moved back a few days .... owing to long weekends / Bank Holidays just moving back 1 day isn't going to do it? Or get an authorised o/d sufficient to cover the Mtge payment.

Edit ..... not thinking well tonight. Surely you have a problem already? If the SO to the Bills account is 1st of the month and the Mtge DD is first working day ..... they are often the same day! Or have you just moved the SO to the Bills account backwards a few days?

MarkyMarkD

Why not switch your accounts round, so the bills are paid from the account you are paid into (hence no timing problem) and the surplus is transferred to a "spends" account?

YorkshireBoy

MarkyMarkD wrote: »

Why not switch your accounts round, so the bills are paid from the account you are paid into (hence no timing problem) and the surplus is transferred to a "spends" account?

...but still move your DD's & SO's back a few more days, just in case your salary is ever late.

MarkyMarkD

I would have said that ... but salaries are virtually never late unless you work for a very flaky employer. I would add, as an aside, that I wish people would plan their finances without using extra current accounts as it simply adds complexity and vastly increases the probability of going overdrawn and hence incurring charges.

YorkshireBoy

MarkyMarkD wrote: »

I would have said that ... but salaries are virtually never late unless you work for a very flaky employer.

I note you use the word 'virtually' MMD, but do you remember the BACS Direct Credit problem of last year (or a couple of years ago)?

If you operate your bills account as I do, and the OP plans to do, ie everything leaves on the same day each month shortly after payday, then it's possible to rack up several hundred pounds in charges in one hit...if you don't have an overdraft facility in place.

Poosmate

I have 2 current accounts and have done for about 10 years or more. I do exactly as the OP is/is planning to do. Money is transferred into my "bills" account on the same day as my payday (which is static 28th or the Friday before if 28th falls on the w/e) and there has never been a problem.

I make sure there is more going into the "Bills" account to cover the bills by paying a little extra on each DD/SO. So for a regular DD of £48 I put in £50 to cover it or if it's £32.50 I put in £35. It has in the past sort of "futureproofed" that account.

I would call your bank to discuss this change in your payday and maybe change the transfer of the money from "main" account to "Bills" account on the last working day if you can. That way there shouldn't be a problem as that last working day of the month is always before the first day of the next month.

MMD, I don't understand what you mean when you say having 2 current accounts "adds complexity and vastly increases the probability of going overdrawn and hence incurring charges." It's not complex at all. I have never incurred any charges on my "Bills" account and rarely on my "Main" account (so rare it's not even worth claiming the charges back). I sleep soundly at night knowing that all of my bills are covered. It costs nothing and the peace of mind it gives is priceless.

Poo

Oh I just thought,

I remember once some people at our place were payed late or something and there was an uproar because some people did incur bank charges because of the !!!! up. Our employer re-imbursed all their costs. I would want compensation if it happened nowadays I mean just think of the damage to your credit record! lol

!!!! = male chicken, not the f word

Sammz

MarkyMarkD wrote: »

I would have said that ... but salaries are virtually never late unless you work for a very flaky employer. I would add, as an aside, that I wish people would plan their finances without using extra current accounts as it simply adds complexity and vastly increases the probability of going overdrawn and hence incurring charges.

My salary is never late. I've been using the two account system for the last 10 years (way before online banking) and I've never been overdrawn or had any charges. I put extra in to the bills account which used to be handy but now tends to go to my savings account.

Thanks everyone for your replies. My mortgage company won't change the date unless I change to Standing Order and reading the charges it's £25 a year for that. Clydesdale don't seem to have a "last working day" transfer option. I guess the easiest thing is to have the mortgage come out of my main account. I'm a bit anal so that will bug me for a while

MarkyMarkD

Poosmate wrote: »

MMD, I don't understand what you mean when you say having 2 current accounts "adds complexity and vastly increases the probability of going overdrawn and hence incurring charges." It's not complex at all. I have never incurred any charges on my "Bills" account and rarely on my "Main" account (so rare it's not even worth claiming the charges back). I sleep soundly at night knowing that all of my bills are covered. It costs nothing and the peace of mind it gives is priceless.

For people who have enough money sloshing around, it's not a problem.

But for anyone who's ever overdrawn on either account, it's costing unnecessary money. Having a single account will minimise the chance of either of them being overdrawn at any point in the month.

You say "it costs nothing" but you've incurred charges on your main account - which you might not have done, had you not had money sitting in your other account. Do you see what I mean?

Poosmate

I don't have enough money sloshing around.

I run my "Bills" account for my peace of mind in that I know there will always be enough money in it to pay my household bills. I also know that there is a little extra going into that account so I know that if one of my DD's goes up and I've missed the notification of it for any reason, the extra cost is covered.

My "main" account is used for everyday living like shopping and petrol which, obviously I don't pay by DD or SO. I literally live in my overdraft on my "main" account. It goes into credit until the "Bills" money is transferred then I know how much credit is available to me till next payday. It's rare that I go to the max of that overdraft but some months one has extra expenses like weddings, funerals (I had 2 in 2 weeks in February, contributions to flowers and travelling expenses) etc. In those months I know I have a few pounds in my "Bills" account that can be transferred into my "Main" account to keep it from going over the limit without dipping into my small emergency fund (savings). This again gives me great peace of mind.

As I said the charges for exceeding my overdraft limit are rare, I can't even remember the last time I incurred any charges. I learnt from my mistakes of old and keep an eye on that account especially in expensive months.

This system works for me, allowing me to work on paying off my debts without overpaying at the expense of a "bounced" DD or SO, as may happen if I had only one account with payments going out left, right and centre.

Some people need "a place for everything and everything in it's place" to see clearly, understand and manage their finances. Having two current accounts does that.

Poo

P.S. The excess money in my "Bills" account amounts to about £20 per month and if it was in an all inclusive account would just get swallowed up by the day to day living leaving nothing to fall back on - if it's not in the account I can't spend it but it's only a transfer away should I need it for either bailing out or saving.

MarkyMarkD

I think you're missing my point. If there are £100s going through the "bills" account, then you are presumably transferring £100s into the "bills" account on pay day. So you are overdrawn for most of the month on your main account, whilst an equivalent credit is sitting in the "bills" account.

I understand that some people need to operate on a concept of jars of money for this and that bill. I don't personally have that need. All I wanted to point out is that it's rarely going to be the most cost-efficient way to run your finances.

You could achieve the same result with a single bank account, simply by keeping a record of which bills have, and haven't, been paid at any point in time.