Personal Finance

Moving money: Getting interest from both institutions?

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  • Feb 9th, 2014 10:28 am
[OP]
Sr. Member
Jun 27, 2012
913 posts
98 upvotes
Winnipeg, MB

Moving money: Getting interest from both institutions?

Recently I moved some money. I realized that some destination institutions credit your account from the moment you start the transfer. But the originating account has to pay you until the money leaves. So if you did this over a weekend or holiday, you might get a few days of double interest. Wondering if many people are aware of this? Of course with current interest rates being so low its not going to amount to much, but its an interesting principle nevertheless. This is the advantage of using the destination institution for moving the money if they credit you on the initiation day, not the arrival of funds day. Otherwise they won't credit you the money because they obviously don't know its coming. I wonder if people try this with larger amounts that might be leveraged. I think there is a term for this and its illegal though in the markets. Can't remember the term. Double dipping interest? :)
9 replies
Deal Fanatic
May 9, 2007
8552 posts
2304 upvotes
Vancouver Island, BC
Isn't this a form of the criminal offence of "kiting"?
"It is difficult to get a man to understand something when his salary depends on his not understanding it." Upton Sinclair

“Our house is on fire.” Greta Thunberg
[OP]
Sr. Member
Jun 27, 2012
913 posts
98 upvotes
Winnipeg, MB
Is there another form of kiting that doesn't involve cheques I wonder?
Deal Fanatic
May 9, 2007
8552 posts
2304 upvotes
Vancouver Island, BC
ksgill wrote: Wrong, cheque kiting involves nonexistent funds.
I appreciate that cheque kiting commonly involves non-existent funds, but I'm not sure that is required, which is why I suggested "a form of".
The Federal Bureau of Investigation defines check kiting as "a scheme which artificially inflates bank account balances, in accounts that are under common control, for purposes of obtaining unauthorized use of bank funds, through the systematic exchanging or swapping of checks between these accounts, in a manner which is designed to misuse the float that exists in the banking system."
http://www.bankersonline.com/articles/s ... n02a9.html

This definition would not require the use of non-existent funds.
"It is difficult to get a man to understand something when his salary depends on his not understanding it." Upton Sinclair

“Our house is on fire.” Greta Thunberg
Deal Fanatic
Mar 24, 2008
5995 posts
2254 upvotes
Toronto
MexiCanuck wrote: I appreciate that cheque kiting commonly involves non-existent funds, but I'm not sure that is required, which is why I suggested "a form of".

http://www.bankersonline.com/articles/s ... n02a9.html

This definition would not require the use of non-existent funds.
I just went over the definitions and none of them fit the described scenario. If you write cheque from Institution A to B and B starts paying you interest from the day you deposit the cheque - I.e. before it clears, you are not not defrauding anyone if you actually have money at A to cover the amount. Not sure how that is cheque kiting. Do expand on what you mean.

It's not that you are writing another cheque back to A... In any case, the onus is on B to not start paying you interest before they get funds from A!
Deal Addict
Apr 12, 2005
1425 posts
177 upvotes
redflagguy2u wrote: Recently I moved some money. I realized that some destination institutions credit your account from the moment you start the transfer. But the originating account has to pay you until the money leaves. So if you did this over a weekend or holiday, you might get a few days of double interest. Wondering if many people are aware of this? Of course with current interest rates being so low its not going to amount to much, but its an interesting principle nevertheless. This is the advantage of using the destination institution for moving the money if they credit you on the initiation day, not the arrival of funds day. Otherwise they won't credit you the money because they obviously don't know its coming. I wonder if people try this with larger amounts that might be leveraged. I think there is a term for this and its illegal though in the markets. Can't remember the term. Double dipping interest? :)
Which bank(s) have this feature? I use ING, PC and they don't have that situation.
Deal Addict
User avatar
Oct 4, 2004
4101 posts
1124 upvotes
Vancouver
a_1_a wrote: Which bank(s) have this feature? I use ING, PC and they don't have that situation.
I have ING and understand what the OP sees. When I transfer an amount from my B&M account to ING, ING will start the transfer on the next business day and the funds will come through either same day or the next day. The funds never clear out of the other account for at least another 1 or 2 days. I would assume that the almost instant arrival of money is due to the little bit of trust ING has placed on you as a client that the funds will clear from your other account, like how any bank will instantly deposit money (up to the hold amount) from a cheque deposited to an ATM. Mind you, these are always little amounts, never more than what my account hold is. I assume when you start moving larger amounts, the arrival of money may be delayed until the funds actually clear. Anyway, this is not an experiment I'm keen to try because the reward is so little at such small amounts, but OP does have a point.
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Deal Addict
Apr 12, 2005
1425 posts
177 upvotes
lhsonic wrote: I have ING and understand what the OP sees. When I transfer an amount from my B&M account to ING, ING will start the transfer on the next business day and the funds will come through either same day or the next day. The funds never clear out of the other account for at least another 1 or 2 days. I would assume that the almost instant arrival of money is due to the little bit of trust ING has placed on you as a client that the funds will clear from your other account, like how any bank will instantly deposit money (up to the hold amount) from a cheque deposited to an ATM. Mind you, these are always little amounts, never more than what my account hold is. I assume when you start moving larger amounts, the arrival of money may be delayed until the funds actually clear. Anyway, this is not an experiment I'm keen to try because the reward is so little at such small amounts, but OP does have a point.
I move money between ING & Royal Bank all the time. The money is transferred in and out of both banks on the same day. I.e. if I place an order to move money from Royal to ING before midnight on a business day, then money is deposited into ING(it shows online in the morning) and taken out of Royal(it shows online about 2:30pm ET) on the next business day.
[OP]
Sr. Member
Jun 27, 2012
913 posts
98 upvotes
Winnipeg, MB
UPDATE: Especially for TFSA holders.
We all know that moving money between TFSA accounts takes a while. 2-6 weeks is normal. ING is offering 2.5% now until the end of April with no transfer charges credits you the funds on the day you make the transfer (over the phone) so you earn money from both institutions because the other institution has to pay you until the funds leave there. Now if they pay on the minimum monthly balance you may not get as much as a daily balance. In reality that won't make much difference as we're only talking about 32k max here. Still its nice to get paid twice!

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