Hi All, this is off the topic of online trading, but I need some guidance. Hope you can advise. I have an access bond, on the 25th of each month the bond amount is deducted from my current account and I have noticed since I do have a fair amount of cash in my access bond the same amount is deducted from my access account as well, only in the first week of the following month, the balance of my access bond is the same as before the 25th again (+ interest). Is this normal? Your imput will be appricated, although I think some forumites have way to much money to have bonds ..... :)
Sounds very weird to me. Surely if money arriving from currect account is into bond, bond should decrease by X amount (bond installment -interest payable) the difference deducted from bond account.
2 tips though.
1 The bank does a run on interest calculations on 25th every month. (You paying on 25th by debit order gets processed only after hours (essentially the next day) and if it is between banks ie ABSA to FNB etc expect upto 48 hours (and if it is a weekend - after 7 pm Friday - the money will come from your current account and only reflect in bond by Tuesday next week). So try arrange debit order for 23rd or 24th latest. You save 2 days interest calculations (25th when bank runs balance + interest etc and 26th when you money reflects in account)
2 Can you arrange all you cash/salary gets pad into your bond account and hopefully before the 24th. This way you have a lump sum amount in the account saving mega interest and through the access facility you then arrange to move cash for you other accounts (current) from access account at month end (also before 7pm else it is only processed the next day - even though it might show in your account (same bank etc).
These are sneaky little tricks banks dont tell you about....
Oh one more, use a Credit card with 55days interest free to do all shopping (DO NOT DRAW CASH ON IT - INTEREST RUNS IMMEDIATELY). That way cash sits in your bond for upto 50 days (remember you have to transfer from access to Credit card and that can take upto 4 days even intra bank thus 50 days) and you save huge on bond interest.
Remember pay the entire CC balance off to avoid higher interest rates there!!!!
But it does take massive dicipline to run accounts like this. To many people fall into the trap of paying min balances etc then get killed on interest both in bond and CC...
I had a discussion with more than one of the call centre operators their responses were something like this: a) Say my bond is about 700k, the bond amount of 7k is deducted from my current account on the 25th, 7k is also deducted from my access bond (which has additional funds in). In the 1st week of the month the 7k is added back in my access bond with the interest caculated for the month. b) If I did not have funds in my access bond on the 25th of the month, the normal debit order on my current acc goes off as normal, the bond amount I can see in the access bond increases with 7k and then in the 1st week of the following month, the amount reduces again back to what is suppose to be. What p....s me off is that in case (a), what if I really have an emergency and needs my extra cash, this will be 7k less...... Peeps out there who are employed by FNB & ABSA, rest assured, it is not your employer.
If the Insurance is done through the same bank you will find that the replacement value of your house will be double the actual amount within 2-3 years and you will be paying way too much building insurance monthly. This is deducted from your account monthly in reverse which has a significant impact over 20 years on the capital reduction and interest payable. Also in my experience dio not take a life policy per property. Get one life policy in which the interests of the various institutions are noted.
Aside: Out of interest if you pay in extra into your bond it is as if that money is earning inerest at the rate you are paying interest. For example if you put a lump sum x you will find of course that you pay off sooner. At the end of payments, if you look at the gaph showing how much you would have owed had you not put in the lump sum you will see that the amount saved is x plus the interest on x at the rate you were paying interest