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@JAY305 wrote:
@subwaysandwich wrote:
@jamesdwi wrote:
@subwaysandwich wrote:Its purpose?
Its usually an unsecured line of credit that gives you flexibility to access the funds anyway you choose. Via a check written to the account, transfer to your Checking account or used as a Over-draft-protection. Its a very expensive credit usually 16% or higher, for people that even qualify for it, could expect to see APR on credit card accounts of 15% or less, and secured lines of credit would be under 5%, It could report as an installment loan depending on the lending source, so it may help your credit report by adding diversity and if you have cash flow issues it can be useful.
Is it the same concept of credit cards where you keep a balance, PIF, etc?
Yes
I have a Custom Credit Line with Citibank. As others have pointed out, it is an unsecured line of credit. I can easily access the line of credit by writting a check to either myself or to a merchant who accepts checks or simply by logging onto citibank.com and transfering cash from my line of credit to my checking account.
Unlike a credit card, you don't have to pay an absorbant interest rate similar to if you were to take a cash advance on a credit card. Notably, my interest rate on my line of is very competitive.
But, again - once you draw against the line of credit all other aspects are the same in regards to your ability to PIF each month or pay the minimum monthly payment.
If that's the case, why do people get credit cards and not just Line of credit?
@subwaysandwich wrote:
@JAY305 wrote:
@subwaysandwich wrote:
@jamesdwi wrote:
@subwaysandwich wrote:Its purpose?
Its usually an unsecured line of credit that gives you flexibility to access the funds anyway you choose. Via a check written to the account, transfer to your Checking account or used as a Over-draft-protection. Its a very expensive credit usually 16% or higher, for people that even qualify for it, could expect to see APR on credit card accounts of 15% or less, and secured lines of credit would be under 5%, It could report as an installment loan depending on the lending source, so it may help your credit report by adding diversity and if you have cash flow issues it can be useful.
Is it the same concept of credit cards where you keep a balance, PIF, etc?
Yes
I have a Custom Credit Line with Citibank. As others have pointed out, it is an unsecured line of credit. I can easily access the line of credit by writting a check to either myself or to a merchant who accepts checks or simply by logging onto citibank.com and transfering cash from my line of credit to my checking account.
Unlike a credit card, you don't have to pay an absorbant interest rate similar to if you were to take a cash advance on a credit card. Notably, my interest rate on my line of is very competitive.
But, again - once you draw against the line of credit all other aspects are the same in regards to your ability to PIF each month or pay the minimum monthly payment.
If that's the case, why do people get credit cards and not just Line of credit?
Not all banks offer this type of product. It is a very high risk product. And too, I can imagine the underwritting guidelines are a lot tougher vs. a traditional credit card. I have a sizeable banking relationship with Citibank so I am certain this played into their decsion to extend this type of product.
@subwaysandwich wrote:
@JAY305 wrote:
@subwaysandwich wrote:
@jamesdwi wrote:
@subwaysandwich wrote:Its purpose?
Its usually an unsecured line of credit that gives you flexibility to access the funds anyway you choose. Via a check written to the account, transfer to your Checking account or used as a Over-draft-protection. Its a very expensive credit usually 16% or higher, for people that even qualify for it, could expect to see APR on credit card accounts of 15% or less, and secured lines of credit would be under 5%, It could report as an installment loan depending on the lending source, so it may help your credit report by adding diversity and if you have cash flow issues it can be useful.
Is it the same concept of credit cards where you keep a balance, PIF, etc?
Yes
I have a Custom Credit Line with Citibank. As others have pointed out, it is an unsecured line of credit. I can easily access the line of credit by writting a check to either myself or to a merchant who accepts checks or simply by logging onto citibank.com and transfering cash from my line of credit to my checking account.
Unlike a credit card, you don't have to pay an absorbant interest rate similar to if you were to take a cash advance on a credit card. Notably, my interest rate on my line of is very competitive.
But, again - once you draw against the line of credit all other aspects are the same in regards to your ability to PIF each month or pay the minimum monthly payment.
If that's the case, why do people get credit cards and not just Line of credit?
hard to get, lacks many of the features and protection of using a credit card, no extended warranties, no theft protection, no fraud protection, no rewards. etc.
Would we get a HP for requesting a LOC?
@subwaysandwich wrote:Would we get a HP for requesting a LOC?
Yes, its like applying for any other type of credit. Again, the underwrtting guidelines will more than likely be a lot more restrictive vs. a typical credit card. Keep in mind, the bank or lender is essentially giving you easy access to CASH.
If you are interested in a similar product with less restrictive guidelines, but still provide you with access to cash; you can consider a secured line of credit i.e HELOC (home equity line of credit). this type of product is less risky for a lender considering if you don't make a payment, they will simply forclose on your home.
How many years of banking would I need with a particular lender to even get a LOC?
@subwaysandwich wrote:How many years of banking would I need with a particular lender to even get a LOC?
More than likely it will all depend on the lender. Again, this is a high risk low reward product so not all banks offer this type of product. I have been with Citibank for 17 years with an overall sizeable relationship.
Right now I have 3 Personal Lines of Credit (6.75% APR @ Western FCU, 8.25% at NASA FCU, 8.9% at Boeing Employee's CU). Aside from my first PLOC at Western Federal Credit union, I received the PLOCs at the same time as credit cards, with no prior banking relationship. These 3 organizations, and the others I have talked to, view PLOCs as equivalent to credit cards from a risk perspective (unsecured personal credit). They approve me for an unsecured amount.. and I can choose how much to allocate to each product (e.g. 50% credit card, 50% line of credit) and allow me to transfer the limits between the products.
From a financial point of view, on a credit card, they earn transaction/interchange fees from the merchant each time I swipe a credit card. However, since I don't pay off the balance until the due date, its like I get a 1.5 month interest free loan (offset by the profit they get from transaction.interchange fees). The 1.5 month interest free loan assumes I charge in the middle of the month (0.5 months before they generate a statement) and have approximately one month from my statement posting to the credit card balance due date. Of course, any rewards they pay to me reduce this profit.. (on average I think banks collect around 2% from transaction/interchange fees).
With a personal line of credit, they begin charging interest as soon as you tap the line (no grace period).
So as others have said, the main advantage of a ploc is that you can use the money for anything (just transfer it to your checking account and use it to pay someone that doesn't normally accept credit cards, use it as a cash reserve, or whatever). There are also many credit union credit cards, plus a few national banks like Barclays, that offer credit cards with no cash advance transaction fees (or low or capped cash advance transaction fees), which you can use like a PLOC. E.g. I have the Barclay's Ring card which has an 8% APR, even for cash advances, with a $1 cash advance fee. My 8.9% Western Federal Credit Union card has no cash advance fee, too.
Typically, to get the best rate on a PLOC or credit card you need a 740 FICO. Your income, debt-to-income ratio, and (for very large PLOCs) asset vs liability ratio will determine your initial credit line. Unfortunately, Western and Boeing Employee's CU top out at $25K per PLOC, while NASA FCU goes up to $30K. Places like Wells Fargo, City National Bank, First Republic Bank, UnionBank all max out at $100K or higher, but of course you need very strong income and assets to qualify for larger lines.
@slickshoes182 wrote:@right now I have 3 Personal Lines of Credit (6.75% APR @ Western FCU, 8.25% at NASA FCU, 8.9% at Boeing Employee's CU). Aside from my first PLOC at Western Federal Credit union, I received the PLOCs at the same time as credit cards, with no prior banking relationship. These 3 organizations, and the others I have talked to, view PLOCs as equivalent to credit cards from a risk perspective (unsecured personal credit). They approve me for an unsecured amount.. and I can choose how much to allocate to each product (e.g. 50% credit card, 50% line of credit) and allow me to transfer the limits between the products.
From a financial point of view, on a credit card, they earn transaction/interchange fees from the merchant each time I swipe a credit card. However, since I don't pay off the balance until the due date, its like I get a 1.5 month interest free loan (offset by the profit they get from transaction.interchange fees). The 1.5 month interest free loan assumes I charge in the middle of the month (0.5 months before they generate a statement) and have approximately one month from my statement posting to the credit card balance due date. Of course, any rewards they pay to me reduce this profit.. (on average I think banks collect around 2% from transaction/interchange fees).
With a personal line of credit, they begin charging interest as soon as you tap the line (no grace period).
So as others have said, the main advantage of a ploc is that you can use the money for anything (just transfer it to your checking account and use it to pay someone that doesn't normally accept credit cards, use it as a cash reserve, or whatever). There are also many credit union credit cards, plus a few national banks like Barclays, that offer credit cards with no cash advance transaction fees (or low or capped cash advance transaction fees), which you can use like a PLOC. E.g. I have the Barclay's Ring card which has an 8% APR, even for cash advances, with a $1 cash advance fee. My 8.9% Western Federal Credit Union card has no cash advance fee, too.
Typically, to get the best rate on a PLOC or credit card you need a 740 FICO. Your income, debt-to-income ratio, and (for very large PLOCs) asset vs liability ratio will determine your initial credit line. Unfortunately, Western and Boeing Employee's CU top out at $25K per PLOC, while NASA FCU goes up to $30K. Places like Wells Fargo, City National Bank, First Republic Bank, UnionBank all max out at $100K or higher, but of course you need very strong income and assets to qualify for larger lines.
Sorry if I sound ignorant, but what happens if your PLOC somehow gets compromised (ie fraud, etc)?
My guess is that it would fall under regulation E: info here or here which seems to be a catchall for any kind of electronic financial theft. Basically at a federal level:
However, I would suspect that thefts from a line of credit are much rarer than credit card thefts (e.g. account numbers are not generally known outside of banks so more difficult to steal, account numbers are more difficult to guess since they don't have published patterns like credit cards). The easiest way I can think of to rob from someone's PLOC would be if I have their username & password for their bank's website. Then I could raid all of their accounts (checking, savings, ploc, credit card, etc) at a financial institution. So far, I haven't heard of a PLOC theft, but I don't think most people have PLOCs (especially compared to credit cards).