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Benefits of a PLOC?

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Anonymous
Not applicable

Benefits of a PLOC?

I don't know anything about them. But I've seen approvals for them from CUs around these forums.

 

What are the benefits of having one? Is it not just like a credit card essentially? Maybe better APR?

 

Someone please help a girl out! hehe Smiley Very Happy

Message 1 of 26
25 REPLIES 25
Anonymous
Not applicable

Re: Benefits of a PLOC?


@Anonymous wrote:

I don't know anything about them. But I've seen approvals for them from CUs around these forums.

 

What are the benefits of having one? Is it not just like a credit card essentially? Maybe better APR?

 

Someone please help a girl out! hehe Smiley Very Happy


PLOC are lines of credit that are attached to your checking accounts.  So say you buy something for $50 with your debit card and only have $10 in your checking account, it will go through and will not be charged overdraft fee.  So it is line for overdraft protection giving you a piece of mind knwoing your transactions are not going to be declined.

Message 2 of 26
slickshoes182
New Contributor

Re: Benefits of a PLOC?

I would describe a PLOC more like a loan that doesn't constrain when you can draw from it or when you pay it back. The main benefit over a credit card is that its easy to access the cash for purposes other than purchases (e.g. pay contractors that don't take credit cards, loan someone money, balance transfer from a higher interest loan/credit card, short term cash needs, and so on).

 

Most credit cards hit you with cash advance or balance transfer fees for accessing cash, so a PLOC may make more sense than those. However, some credit cards don't have these fees so you can access your credit card's credit line just as easily as a PLOC. Of course, PLOCs don't offer rewards while many credit cards do.

 

PLOC APR vary widely between lenders so it pays to shop around. PLOCs generally have lower interest rates than rewards cards, but many banks offer lower rates on non-rewards credit cards than their PLOCs. It just depends on the bank. 

 

If you know the amount you need, and want to make steady payments over some time period, you can probably find a loan with a better rate (e.g. many credit unions offer "holiday loans" "christmas loans" "summer loans" etc at very low promotional rates). For me, my cash needs are always very short term, so it doesn't make sense to apply for a loan every time I need cash, nor do I want to wait to pay off the balance (I would end up prepaying).

 

Also, if you don't need a loan now, but may need a loan in the future, and your credit profile/scores may not be as good at that time, you can go ahead and apply for the PLOC and get a good rate, then use it in the future, even if your credit profile/score are not as good and you may no longer qualify for as good a rate. Typically its easier to obtain credit lines when you don't really need them, than when you do, so it can payoff to be prepared.

 

I would avoid using the PLOC (or credit card) as an overdraft line the way Yes-Its-Me mentioned. I suspect some banks or customer service representatives view overdrafts as risky behavior. I would suggest accessing a PLOC by using a website, bank teller, or phone rep to transfer the cash to your checking account or using access checks that they can send you.

Message 3 of 26
Anonymous
Not applicable

Re: Benefits of a PLOC?

This -I would avoid using the PLOC (or credit card) as an overdraft line the way Yes-Its-Me mentioned. I suspect some banks or customer service representatives view overdrafts as risky behavior. I would suggest accessing a PLOC by using a website, bank teller, or phone rep to transfer the cash to your checking account or using access checks that they can send you.

 

I disagree with the above statement as the PLOC is designed for that specific purposes.  What is the difference in writing a check instead of using your debit card attached for transactions to cover cost when pulled directly from the PLOC when you don't have enough in your checking account?  Enlighten me as I am open to hearing new things..

Message 4 of 26
slickshoes182
New Contributor

Re: Benefits of a PLOC?


@Anonymous wrote:

This -I would avoid using the PLOC (or credit card) as an overdraft line the way Yes-Its-Me mentioned. I suspect some banks or customer service representatives view overdrafts as risky behavior. I would suggest accessing a PLOC by using a website, bank teller, or phone rep to transfer the cash to your checking account or using access checks that they can send you.

 

I disagree with the above statement as the PLOC is designed for that specific purposes.  What is the difference in writing a check instead of using your debit card attached for transactions to cover cost when pulled directly from the PLOC when you don't have enough in your checking account?  Enlighten me as I am open to hearing new things..


Life is full of situations where how you do something is important. Also, just because you can do something, doesn't mean you should.

 

I agree completely that using up your checking account, and then Personal Line of Credit is not much different from using your Personal Line of Credit first. You may be right that all banks will see it the same way. However, I would worry that overdrawing a checking account is one risk factor some banks consider. Maybe all of them don't care about it if you have a linked credit card or line of credit account.. but I wouldn't want to risk it. Instead, I would be proactive, and tap my line of credit whenever I need it, and not worry about whether banks are tracking how often my checking account has been overdrawn. Since I don't work at a bank, and am too lazy to look for references, I'll admit I can't say 100% that any banks track overdrawing checking accounts (or only in situations where no other account is linked). Maybe underwriters don't mind seeing checking accounts being overdrawn either when manually reviewing. Feel free to ignore my advice.

 

My impression, is that when some allowed behavior could be interpreted as risky (e.g., a customer pulls more cash than they expected from a checking account) vs safe and rational (the person intended to overdraw their account and use their personal line of credit), many banks err on the side of caution. While unlikely to cause any adverse action on their own, I fear that setting off enough internal risk flags can have an impact on your relationship with a bank.

 

Hopefully my previous post explained that there are both a variety of ways to access plocs and use them. Saying that they were designed for overdraft protection is a bit narrow, in my view. Some banks emphasize their use for overdraft protection, while others don't mention it on the front of their PLOC webpage. If I were talking to an underwriter about approving me for a new or larger PLOC, I would certainly emphasize using it to help me be successful, and not that I plan to hit $0 on my checking account (though not explicitly disallowed). Just my opinion. 

Message 5 of 26
youdontkillmoney
Valued Contributor

Re: Benefits of a PLOC?


@Anonymous wrote:

I don't know anything about them. But I've seen approvals for them from CUs around these forums.

 

What are the benefits of having one? Is it not just like a credit card essentially? Maybe better APR?

 

Someone please help a girl out! hehe Smiley Very Happy


^^^^^^^

PLOC comes in handy when you need cash so you borrow from your PLOC at a lower cost than your credit card and at a larger possible amount. It is faster than finding out you need $5,000 right now and then going to a bank for a personal loan, a PLOC set up gives you access to cash right away. If you have tons of cash sitting in your checking account, then you don't need a PLOC to meet the flunctuations in your cash needs until your next pay check.

Message 6 of 26
Anonymous
Not applicable

Re: Benefits of a PLOC?


@slickshoes182 wrote:

@Anonymous wrote:

This -I would avoid using the PLOC (or credit card) as an overdraft line the way Yes-Its-Me mentioned. I suspect some banks or customer service representatives view overdrafts as risky behavior. I would suggest accessing a PLOC by using a website, bank teller, or phone rep to transfer the cash to your checking account or using access checks that they can send you.

 

I disagree with the above statement as the PLOC is designed for that specific purposes.  What is the difference in writing a check instead of using your debit card attached for transactions to cover cost when pulled directly from the PLOC when you don't have enough in your checking account?  Enlighten me as I am open to hearing new things..


Life is full of situations where how you do something is important. Also, just because you can do something, doesn't mean you should.

 

I agree completely that using up your checking account, and then Personal Line of Credit is not much different from using your Personal Line of Credit first. You may be right that all banks will see it the same way. However, I would worry that overdrawing a checking account is one risk factor some banks consider. Maybe all of them don't care about it if you have a linked credit card or line of credit account.. but I wouldn't want to risk it. Instead, I would be proactive, and tap my line of credit whenever I need it, and not worry about whether banks are tracking how often my checking account has been overdrawn. Since I don't work at a bank, and am too lazy to look for references, I'll admit I can't say 100% that any banks track overdrawing checking accounts (or only in situations where no other account is linked). Maybe underwriters don't mind seeing checking accounts being overdrawn either when manually reviewing. Feel free to ignore my advice.

 

My impression, is that when some allowed behavior could be interpreted as risky (e.g., a customer pulls more cash than they expected from a checking account) vs safe and rational (the person intended to overdraw their account and use their personal line of credit), many banks err on the side of caution. While unlikely to cause any adverse action on their own, I fear that setting off enough internal risk flags can have an impact on your relationship with a bank.

 

Hopefully my previous post explained that there are both a variety of ways to access plocs and use them. Saying that they were designed for overdraft protection is a bit narrow, in my view. Some banks emphasize their use for overdraft protection, while others don't mention it on the front of their PLOC webpage. If I were talking to an underwriter about approving me for a new or larger PLOC, I would certainly emphasize using it to help me be successful, and not that I plan to hit $0 on my checking account (though not explicitly disallowed). Just my opinion. 


@slickshoes182,

 

That is the whole point of a PLOC.  Your checking account is never overdrawn as the PLOC is your emergency funds for purchases..  And thanks for the explaination though...

Message 7 of 26
Anonymous
Not applicable

Re: Benefits of a PLOC?

Good info with differing opinions. Never though of a PLOC being used for checking overdrafts and then the bank's keeping track as potential bad behavior (right or wrong) it is a point of view. As to the purposes of a PLOC they have been well covered in this thread. There is a bank I have a PLOC that issues checks to use on the account, connects it with my checking accounts and attaches one of their generic credit cards dedicated to the account with virtually no fees for use (other than the 9.25% interest rate); the bank requires a banking relationship to obtain the PLOC and uses both an internal relationship score as well as input from the credit bureaus beyond the regular three (note they seem to be tighter on the approval of the PLOC than on their credit cards).
Message 8 of 26
Anonymous
Not applicable

Re: Benefits of a PLOC?

Interesting and good to know.

 

I would probably not use it for overdraft protection, however, maybe some quickly needed cash in a pinch.

 

Thanks for the replies, everyone. Just what I was looking for! Smiley Happy

Message 9 of 26
Anonymous
Not applicable

Re: Benefits of a PLOC?

I have autopay for all my bills, my rent, etc, all attached to an account with a PLOC. I have my salary direct deposit INTO THE PLOC.

Every single transaction on that account goes through as an overdraft that draws down the PLOC.

I routinely start the month with a huge credit balance on the PLOC (my salary) then bills come out reducing it to about zero. One of the "bills" is an automatic contribution to an investment account for long term savings in the amount I budget I should have left.

If I spend more than usual I will run a small balance on the PLOC until next month's salary arrives.

This system is meant to minimize the odds of my miscalculation resulting in a real overdraft or a bounced payment.
Message 10 of 26
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