Why 3.30pm is the best time of day to pay your bills

In the old days banks closed their doors mid-afternoon, but with online banking and ‘faster payments’, you can move money and pay bills within minutes. 

Despite this move towards speedier transactions, some banks still impose ‘cut-off’ limits, which means credit card payments made in the afternoon may not be credited until the following working day. If you’re not aware of this it can mean a £12 late payment fee plus interest on the outstanding balance. Here are some tips on what to pay when.



Pay credit card bills before lunch

According to research from the consumer group Which? bank cut-off times start as early as 3.30pm for credit card customers with Co-op Bank. This means if you’re paying your bill on its due date, the payment’s got to reach the bank by this time or your account won’t be credited until the next working day.  

If however you bank with the Co-op and have its credit card (which you might think would guarantee a speedier service), you’re actually unable to make ‘same day’ payments to your credit card account and need to allow even more time, which the bank confirms is 9pm the day before payment is due.

The Which? research claims other credit card providers also have ‘cut-off’ times for same day payment, including Capital One at 5.30pm and Santander at 6pm, although some banks like M&S and First Direct have much later deadlines at 10pm and with Barclaycard you’ve got up to 11.45pm.  

[Related link: Pay no interest on your credit card debts for up to 26 months]



Can banks do this?                                                  

Under the Payment Services Regulations, which were introduced in January 2012, payment transactions within the EU should be credited the following ‘business’ day, according to Jemma Smith at the Payments Council. 

Known in the financial industry as ‘D+1’ (deposit plus one), it’s the legal cut-off limit, but Smith says: "This legislation allows banks and card companies to set their own ‘business’ working days which is why some are 3.30pm, while others are 11.45pm."

The UK’s ‘faster payments’ service is "designed to beat this with money transfer between accounts almost instantaneous". However credit card companies may still have cut-off times and the Payments Council say these should always be made clear on your statement.

While you might think having both your current account and credit card with the same bank would speed up any payment transfer, bizarrely enough it can slow things down, as in this case the bill won’t necessarily go through as a faster payment but be processed internally which can take longer.

The obvious way to avoid this problem is of course to give yourself a day in hand; but in the current financial climate it’s not always practical to pay your bills in advance.

[Related link: Switch banks now and earn £100 or 5% interest]



What about other bills?

Standing orders and direct debits offer an easy way to pay your bills, but check the time of day these payments leave your account, particularly if you run low on funds towards the end of the month. Halifax’s system is set up to pay out at a minute past midnight so if money’s tight this may mean you’re overdrawn before breakfast, whereas if you pay bills online later in the day you may have a chance to top up your account first.



Best time of day to top up savings

Banks calculate the interest on savings, mortgages and overdrafts at different times of the day so it’s worth checking what time of day this is with your bank or building society so you don’t lose out.

Halifax says its interest calculations are based on what’s in your account at a minute past midnight each day, whereas Nationwide calculates its current account interest at the end of the day at 11.59pm.  

So if you’re a Nationwide customer, being quick off the mark and paying in money at 9am means you won’t actually be any better off than if you wait until late at night. And if you’re a Halifax customer it means you’ll be clobbered with overdraft charges from the start of the day so no chance of avoiding this by paying in money later that day.

First Direct say its savings interest is calculated daily over a two hour window from 10pm to midnight, so providing funds are in your account by then you’ll receive that day’s interest, while with HSBC it’s an 11.45pm limit.   

It's worth checking bank ‘buffer zone’ times too as some, like HSBC, advise allowing a two hour time timescale for online payments to go through.

[Related link: Take a look at the latest savings accounts]



Best time of day to pay your mortgage

There’s no hard and fast rules on the time of day lenders calculate mortgage interest, according to the Council of Mortgage Lenders, with the decision down to individual lenders. 

I rang several lenders but none would confirm the time of day mortgage interest is calculated, although HSBC says that providing you make any ‘overpayment’ by 11.45pm then you’ll benefit from a reduction in interest on your balance owed from that day.

However with most lenders opting for daily mortgage interest, it makes sense to make any overpayments, providing your mortgage deal allows them, as early as possible in the month.

[Related link: Could you save money on your mortgage by switching? Get free, expert advice]