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I don't think LOC's are obsolete as most banks and CU's offer them. It all depends on how you utilize a LOC.
I have one at my bank which has saved my behind several times when I tried to float something or just plain forgot to balance my register (yes, I am an old school Xennial and I still balance my checkbook). A day or two of interest at the bank (13.49%) is literally a few cents.
I have a LOC at SSFCU at 7.25%. I mainly got it because (at the time) it was 6% and it was too good to pass up. I justified opening this LOC thinking I could use it for short term needs for a small home improvement project. But to your point, a 0% card for 12 months makes more sense.
Some banks, like Chase, do not like checking/overdraft LOC's because they are not profitable enough. Why allow someone to borrow a few hundred dollars for a few days at $0.03 interest when you can instead have them sign up for a credit card and; if the customer uses it for overdraft, they can charge that customer a cash advance fee (5%) plus daily interest on 20+%? They also like to push HELOCs so that they have a security interest in the funds and usually a HELOC will garner a larger amount used which means more interest.
Rebuilders here love PLOCs, or more specifically the NFCU CLOC because it boosts their credit to debt ratio. But they rarely, if not ever, use it.
In the US, personal lines of credit PLOCs do not make much sense as our credit cards offer great rewards, low interest rates and other low rate promotions. Personal lines of credit are far more popular in Canada where APRs and annual fees tend to be much higher than a PLOC which can be as low as 4-5%.
@Anonymous wrote:
I use my line of credit as an overdraft on my primary checking account. There is no overdraft fee and I can draw up to 10k over my balance. I just pay the daily interest for whatever I used at 8.9%. Then I set up all my credit cards to auto pay from my checking account along with a variety of other bills, rent, insurance, etc.
This ensures that even if I miscalculate, or forget about a bill, every bill and credit card gets paid on time. If I screw up it's just a small amount of interest.
Plus in an emergency I can instantly access the cash using a regular check or an ATM. Which is convenient, because my long term cash savings are in a Marcus account and will take 2 or 3 business days to transfer.
In an emergency or if I make a miscalculation I just pay the 8.9% interest for a couple days until I can get my cash transferred over from Marcus..
I don't PLAN on using the line of credit, but sometimes it happens that I do use it, usually never borrow for longer than a few days.
Could be obsolete if a financial institution allows for credit card overdraft protection, i.e: Bank of America, USAA, Wells Fargo.
@Anonymous wrote:
My Wells Fargo Checking is linked to my Cash Wise Visa. If say the interest rate is 20% ( I have no idea what the actual interest rate is, I didn’t check) and I need the money for a week because it takes me that long to move money around, that costs me .38%. Meanwhile I’m making 1.5% cash back on the credit card (I assume an overdraft will count as a purchase), so it looks like I would come out ahead.
I have a Wells Fargo credit card linked to a WF checking for OD protection, but you only want to use that as a last-resort.
The amount transferred does not earn rewards, there's a steep fee (IIRC $20), and the APR will be your cash advance rate, which will start the day of the transfer (no grace period).
My longest checking acct. is with BoA, and yes they have enough fees to drive person crazy and broke. lol
But with my local CU, i have my checking OD's covered by their CC. No fees, uness you carry the balance long enough for the interest to pile up.
But it's only 9.6%, and I can transfer from savnings ASAP to cover until my next pay day deposit.