In my interest

By THIS IS MONEY
Updated:

 

My building society tells me it may take up to ten days to transfer money by standing order to another building society. Who pays the interest for that ten days - the society that the money comes from or the one it goes to? JJ, York.

Richard Tyson-Davies of the Association of Payment Clearing Services says: When money is in transit like this there is no interest paid to either the individual sender or the recipient, by any institution. This is standard throughout the banking system.

What interest there is to be gained on money in transit is taken by the institutions involved in the transaction. In your case, as it can take ten days, my guess is that there would be four of them, because many smaller societies use bigger institutions to 'clear' their transactions for them, ie, handle them as they go into and out of the payment clearing system.

It's not uncommon for the institution that handles clearing for the recipient's building society to 'sit on' the money before passing it on to the society, which is why the transaction may take ten days, even though the actual clearing process only takes three.

This way the recipient society's clearer makes interest itself on the money, which is often used to fully or partially offset the cost of the transaction, so costs are reduced for customers.

You could ask both societies what their policy is. However it is very unlikely you could do anything about the time taken and the interest situation. Is the amount of money involved worth the hassle anyway? If you are using one of the smaller building societies it may be you are getting a better interest rate than you would with a bigger bank that clears in just three days.

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