topic Re: Benefits of a PLOC? in General Credit Topics

Benefits of a PLOC?

Anonymous — Sat, 28 Mar 2015 20:37:07 GMT

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

Re: Benefits of a PLOC?

Anonymous — Sat, 28 Mar 2015 20:49:53 GMT

@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

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.

Re: Benefits of a PLOC?

slickshoes182 — Sun, 29 Mar 2015 23:26:43 GMT

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.

Re: Benefits of a PLOC?

Anonymous — Mon, 30 Mar 2015 00:21:42 GMT

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..

Re: Benefits of a PLOC?

slickshoes182 — Mon, 30 Mar 2015 01:29:40 GMT

@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.

Re: Benefits of a PLOC?

youdontkillmoney — Mon, 30 Mar 2015 02:04:07 GMT

@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

^^^^^^^

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.

Re: Benefits of a PLOC?

Anonymous — Mon, 30 Mar 2015 02:31:07 GMT

@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...

Re: Benefits of a PLOC?

Anonymous — Mon, 30 Mar 2015 16:27:50 GMT

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).

Re: Benefits of a PLOC?

Anonymous — Mon, 30 Mar 2015 23:32:02 GMT

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!

Re: Benefits of a PLOC?

Anonymous — Sun, 24 May 2015 07:14:19 GMT

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.

Re: Benefits of a PLOC?

Marcos8 — Sun, 24 May 2015 16:40:20 GMT

Do all PLOC's report as revolving? Do they report at all if there is no activity for the month? I'm really beginning to think a PLOC is what I need next In my profile. I want something to help my overall UTL and gives me a choice to use when cash/check is the only option, and usually comes in at lower rate then a credit card for use. I would never use a credit card for cash access. Basically for those cash time opportunities when I'd rather use someone else money to get things moving instead of my own and they pay back at a lower rate.

Re: Benefits of a PLOC?

Revelate — Sun, 24 May 2015 18:53:03 GMT

@Anonymous wrote:
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.

So basically it's replaced your checking account? Can you write a "check" from it for things that traditionally don't take a CC payment like rent/mortgage, perhaps via Bill Pay with it as a source account?

Interesting idea, sort of wonder the merits of it if cash flow isn't a problem, but given that we shouldn't be keeping tons of cash in a checking account anyway, if it's flexible enough to draw against on the various modern transactions could work in one's favor if things are being balanced rigorously... I just keep my cash reserve in my checking account and don't have an issue personally if I blow through a paycheck (it happens albeit occasionally in my world), at least when I'm employed at any rate.

Have to do some research to see whether this might be applicable in the business startup case where taking on an employee (with a real wage) is always a scary proposition if your revenue stream is variable and if one of the more traditional loans weren't feasible for whatever reason.

Re: Benefits of a PLOC?

Revelate — Sun, 24 May 2015 18:51:52 GMT

@Marcos8 wrote:
Do all PLOC's report as revolving? Do they report at all if there is no activity for the month? I'm really beginning to think a PLOC is what I need next In my profile. I want something to help my overall UTL and gives me a choice to use when cash/check is the only option, and usually comes in at lower rate then a credit card for use. I would never use a credit card for cash access. Basically for those cash time opportunities when I'd rather use someone else money to get things moving instead of my own and they pay back at a lower rate.

IIRC there was a breakpoint around the 30-35K range reported a few years ago (illecs and others) where it was reported as installment, but smaller ones universally report as a revolving account AFAIK.

Re: Benefits of a PLOC?

Anonymous — Mon, 25 May 2015 06:11:07 GMT

Revelate wrote:

So basically it's replaced your checking account? Can you write a "check" from it for things that traditionally don't take a CC payment like rent/mortgage, perhaps via Bill Pay with it as a source account?

I have regular checks for it that I can write, that look and clear like regular checks, and cost me nothing if there's a credit balance in the account to cover the check. With the PLOC I have right now I can't do some other things like bill pay directly BUT what I can do is set those up from the actual checking account that is linked to the PLOC. The bill will pay whether there is a balance or not, and draw from the PLOC as needed via "overdraft".

In Canada I've been running my affairs this way for ten years. There I have a HELOC with a very low interest rate, and it looks EXACTLY like a regular checking account except that it can go negative (with interest).

;if things are being balanced rigorously...

I'm not all that rigorous. That's the appeal. I don't spend beyond my means, but I don't worry if I"m over or under my spending by a few dollars. As my salary deposits into the PLOC it is always paid in full every month. Whether it then carries a few dollars or sits positive--I don't sweat it. I adjust my spending if I see it get out of whack by a significant amount.

I don't know whether all/most/any-other PLOC's have this feature, the US PLOC I have was provided by the US arm of my Canadian bank so it may be "Canadianized". I would like to know whether other PLOC's work this way.

Re: Benefits of a PLOC?

Anonymous — Mon, 25 May 2015 15:53:59 GMT

My PLOC has regular checks that work like regular checks, a generic credit card that allows me to charge against it and the ability to take cash advances both over the counter bank and through ATMs along with overdraft protection or I can transfer from the PLOC by online, mobile, phone, balance transfer or computer. The rate is 9.25% and kicks in immediately as there is no grace period. The PLOC is treated as cash always and there is only a fee if cash is taken as a cash advance with all other transactions no fee. Must be a member of the bank and have a satisfactory relationship with the bank (not everyone is approved). It is organized in the credit bureau report with other bank checking account overdraft lines and I can not tell whether they include it as an installment loan or credit card. The one thing is my bank keeps the overdraft checking accounts under the control of the bank and the PLOC runs under their credit card bank. Also, the bank does NOT allow over payments to any of their accounts. Do have auto pay from my checking account to ensure prompt payment. The bank is particular about the percentage of utilization and will contact you if it gets much over 50%. Have not found this to be the case with the bank's regular credit cards.

Re: Benefits of a PLOC?

Revelate — Mon, 25 May 2015 21:16:44 GMT

@Canadian and @Spider: thank you.

Huh. After I got my mortgage sorted I was going to do some rejiggering of my credit report (likely close out the DCU secured card, probably the Walmart store card too which I've found to be nothing but a headache to manage) and pickup an additional 3-4 tradelines before one of my extended gardening tours post app-spree fashion.

I'm seriously now considering picking up a PLOC as one of those tradelines for the flexibility you both have demonstrated as really the only thing I'm trying to fix is some limits and a flier on a JCB Makurai anyway or if there's some other goal card which usurps it now when I go look at the marketplace (likely my first non-CLI denial but what the hell, I can afford the inquiries at that point). Have to go look at lenders I suppose, SDFCU is the only account I have (which I've done absolutely nothing with post $5 deposit) that appears to offer one.

I sort of expected it would be interest immediate much like a cash advance, but since I don't know what my expenses will be post mortgage (or if I do meet the theoretical chica and take the shot at raising some kids), there will likely be some short-term cash flow issues I'm guessing a PLOC might be a good solution to prevent my having to yank money out of a brokerage account or other money I'd rather not use for near-term only issue.

Longer term a HELOC probably makes more sense but with a brand-spanking new 80% LTV mortgage, that's not in the cards.

Re: Benefits of a PLOC?

Anonymous — Tue, 26 May 2015 18:30:49 GMT

A HELOC set up as a regular checking account is an awesome thing. My Canadian HELOC works exactly like a regular checking account for bill pay, checking, ACH including automated monthly ACH, and it runs at 3.85% interest (tied to my mortgage). I have all my Canadian credit cards tied to it by autopay. So imagine what happened when I did some home renovations and put $25k through my cards in one month: Autopay took it from my heloc and the balance ran at 3.85% until i was able to pay it down.

With a PLOC you get a far less favourable interest rate, mine I think now is 10% and I don't believe anyone offers them below 8.5% (would love to hear from someone with a PLOC below 8.5%). So you are not getting the same interest rate benefit as a HELOC, it's not a fantastic place to run a balance.

But it is still a great safety net. If somehow I overspend instead of getting dinged with a late or missed payment or something bouncing out of my account it just goes onto the PLOC and runs interest until I fix it.

MUCH better to pay interest than have a missed payment.

Once I get a mortgage running in the US I will try and get a HELOC going here too, hopefully then I can get a good interest rate, and at that point the whole system is really pretty cool -- you let your CC's autopay on the last day they are due and anything you can't cover runs on the HELOC at a mortgage level interest rate. Not there yet in the US but in a few years...

Re: Benefits of a PLOC?

Anonymous — Tue, 26 May 2015 19:01:51 GMT

Canadian-in-Seattle - you may not find the same financial tools available. Like what you can do but it may not be available? Not sure. Would try it with my banks but there is not enough equity at 80% to float the HELOC for me. Rate would be 3.99% for me if I had the equity. Certainly lower than my 9.25% PLOC. Do have a fixed rate credit card CL $10K at 6.9% APR. Not shabby at all but not available to the general public except in a very small banking foot print location.

Re: Benefits of a PLOC?

Revelate — Wed, 27 May 2015 07:10:30 GMT

@Anonymous wrote:
A HELOC set up as a regular checking account is an awesome thing. My Canadian HELOC works exactly like a regular checking account for bill pay, checking, ACH including automated monthly ACH, and it runs at 3.85% interest (tied to my mortgage). I have all my Canadian credit cards tied to it by autopay. So imagine what happened when I did some home renovations and put $25k through my cards in one month: Autopay took it from my heloc and the balance ran at 3.85% until i was able to pay it down.

With a PLOC you get a far less favourable interest rate, mine I think now is 10% and I don't believe anyone offers them below 8.5% (would love to hear from someone with a PLOC below 8.5%). So you are not getting the same interest rate benefit as a HELOC, it's not a fantastic place to run a balance.

But it is still a great safety net. If somehow I overspend instead of getting dinged with a late or missed payment or something bouncing out of my account it just goes onto the PLOC and runs interest until I fix it.

MUCH better to pay interest than have a missed payment.

Once I get a mortgage running in the US I will try and get a HELOC going here too, hopefully then I can get a good interest rate, and at that point the whole system is really pretty cool -- you let your CC's autopay on the last day they are due and anything you can't cover runs on the HELOC at a mortgage level interest rate. Not there yet in the US but in a few years...

The PLOC would be one step before emergency cash fund in my financial life. I can probably get a balance carrying card with a lower interest rate and I may try a few apps at traditionally low rate places in my post-mortgage-fiesta spree, but I can't write a check against that if the proverbial fecal matter hits the air circulation device.

I already have autopay setup on everything currently out of my slush fund checking account. I haven't needed it as I typically check all my credit cards around the 1st and 15th of every month, but it's a safety net if I get distracted for whatever reason which historically has happened in my life.

Unless there's a HELOC that runs north of 80% LTV I'm kinda out of that category, though it would be a nice thing to setup for sure at today's interest rates. Certainly not going to spend cash to pay down mortgage to pull a HELOC out of my tuckus, worse than silly.

Anyway I do greatly appreciate the analysis and the advice, many thanks!

Re: Benefits of a PLOC?

Marcos8 — Wed, 27 May 2015 23:51:32 GMT

What are the most popular banks/CU's that offer PLOC's? I hear about Penfed all the time but are there any others that anyone has experience with?