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Taking overdraft and putting it in savings account

Is this a good idea? I was thinking of taking the interest free overdraft the bank gives me (up to £2500) and putting it in a high interest account then repaying it at the end of the year and keeping the interest. I would put it into an account with 4.5% AER so I could have a little more cash floating around. Has anyone done this/would suggest it? Thanks for your help!

Reply 1

mikeyT

2

I'm doing the same thing at the mo and just transfer money around if and when i need it.

Reply 2

bedbug

14

I've done it already, got my £1250 overdraft and stuck it in my savings account. I'm not planning on using it at all, just want to make a bit of interest on it.

Reply 3

shuvle

12

Do you have to have your loan/ grants payed into the account to recieve the full overdraft?

Reply 4

Geerththanan

17

Didn't think of this. Well, didn't know this was possible.

So when I get a student account...I can take out the whole or part of my overdraft...and stick it into a savings account...?

Will I have to transfer this in a certain way, from the student account to the savings...?

Reply 5

pol_student

8

I've done this - and it was quite profitable. Never got so much money for doing so little! I'd recommend everyone does this, if they can.

Reply 6

mikeyT

2

Original post by G&#949

Didn't think of this. Well, didn't know this was possible.

So when I get a student account...I can take out the whole or part of my overdraft...and stick it into a savings account...?

Will I have to transfer this in a certain way, from the student account to the savings...?

You can transfer the money however you want to.

Reply 7

pol_student

8

Original post by G&#949

Will I have to transfer this in a certain way, from the student account to the savings...?

Same way you transfer any other money. You can most likely do it via online banking transfer.

Reply 8

Melana

14

Are you actually *allowed* to do this? My dad is suspicious bless him

Reply 9

SaccerZD

2

Sounds good - does National Savings Account pay well, or not?

Reply 10

Dez

20

It's a bit sneaky, but the banks are asking for it really. If they didn't want people sticking their overdraft into savings accounts, they shouldn't have been giving them out. Just make sure you don't run over your overdraft limit, the fines for this are generally quite heavy.

Reply 11

manifestation of morality

2

how much interest could u get in a year? say from £1500 overdraft?

Reply 12

Dez

20

Come on, don't you know how to use a calculator?

1500/100 = 15 = 1%

15 x 5 = 75 = 5%

So £75 over one year.

Reply 13

FAT32

well, you won't get 5%, thats the AER rate, and very few banks offer that much
in reality youd get ~3 to 3.5%, which is £35/year with a £1k investment. Which is not much at all, hence it isnt 'sneaky' or anything.

Reply 14

G_H_G

So really, its not worth the hassle?

Reply 15

loopymeg

13

If you already have a nice sum in your savings account, then you might as well add your overdraft to it if you want to, then you would get quite a nice amount through the interest.

Reply 16

JayEm

14

FAT32

well, you won't get 5%, thats the AER rate, and very few banks offer that much
in reality youd get ~3 to 3.5%, which is £35/year with a £1k investment. Which is not much at all, hence it isnt 'sneaky' or anything.

For most students earning below the personal allowance (£5000 something per year), this doesn't apply. You get the interest without the tax taken off. Just remember to fill in the R85 form when you open your savings account. Do the same with your student account also, so you're not taxed on the very low interest they give.

Reply 17

Geerththanan

17

Just told this idea to my mum...and she was like..."don't you have to pay back every so and so?"...

So when I open a student account...and take the whole or part of my overdraft..when will I be required to pay it back..?

Reply 18

Dez

20

Depends on who your account is with. Some want it on the day you graduate, others allow it for a year after your course.

Reply 19

Geerththanan

17

So none of them require you to pay it a year later after you take it out or anything...?

Taking overdraft and putting it in savings account

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