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Is the traditional line of credit going obsolete?

Contributor

Is the traditional line of credit going obsolete?

Why would anyone pay interest on a daily balance with so many blank BT checks going around which seems to be standard now for so many cards? 

FICO 8: EQ 721 TU 713 EX 720
UTIL: 3%
Discover $14,900
Citi DC $6,200
BoA Cash $20,400
Amex BCE $9,000
Penfed PLOC $5000
Venture One $4500
Freedom $3500
Amex SimplyCashPlus $13,400
BoA Business Cash Rewards $12,500
Message 1 of 24
23 REPLIES
Established Contributor

Re: Is the traditional line of credit going obsolete?

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.

Amex BCE $40k || BoA Travel $5k || FirstTech MC $5k || BECU PLoC $10k || Discover Miles $27.7k || CITI DC $27.5k || CHASE Amazon $12.5k || BoA Premium Rewards $31k || BoA Cash Rewards 27k // AU on DW's Costco Visa $12k FICO 760
Last Inq 04/2018
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Message 2 of 24
Established Contributor

Re: Is the traditional line of credit going obsolete?

I've considered BT Checks in the past but when reading the fine print of the offer and interest rate always... Put the BT Checks in my shredder and just paid down the balance of what I owed with those zero 0 percent intro's on credit cards.

Gardening 2020-2021
Total CL 113k+ UTIL 0.01% Uber Visa, DoubleCash, Quicksilver, Discover IT, Freedom Ulimited, Blue Cash, Premier Rewards GOLD
Message 3 of 24
Established Contributor

Re: Is the traditional line of credit going obsolete?


@Canadian-In-Seattle 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.

I always have this options also but never had to use it... but the rate your right is much lower.

Gardening 2020-2021
Total CL 113k+ UTIL 0.01% Uber Visa, DoubleCash, Quicksilver, Discover IT, Freedom Ulimited, Blue Cash, Premier Rewards GOLD
Message 4 of 24
Senior Contributor

Re: Is the traditional line of credit going obsolete?

If anything, the 0% offer will only become more profitable for banks than any other marketing offer.

 

For most banks, it costs anywhere from $100 to $250 to acquire new customers.  This includes basic advertising costs but it also includes acquisition costs from things like 0% offers.  The bank's job is to acquire new customers and retain old customers and the cost of doing this hasn't gotten cheaper (more competition).

 

Like all things marketing, everyone will swear they profit from deals but few people actually do.  The human mind is a pro at tricking us into bad math transactions because we get more joy (dopamine) out of new charges and that makes us quickly forget any costs involved in those charges.

 

I've never done a balance transfer in my life and don't plan on starting.  I've seen too many people who bragged about how profitable the 0% deals were only to see them in credit balance inferno just a few years later as the slippery slope drove them to larger and larger 0% balances that eventually they were charged interest (and late fees!) on.

 

0% offers are today's #1 marketing angle for lenders.  They're more valuable than sign up bonuses.

Message 5 of 24
Super Contributor

Re: Is the traditional line of credit going obsolete?

sgonz261 ... like other posters have said ... use the Line of Credit to cover oops on my checking account. Also, I have a Visa Access Card, Checks and the ability to transfer to other accounts internal and external to the bank. Used mine to cover the costs of a new roof when the roofer came early and it took me a few days to get the cash to the bank (paid the Line of Credit off with the Cash). Worked out great and the few days were small in interest.
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Message 6 of 24
Contributor

Re: Is the traditional line of credit going obsolete?


@ABCD2199 wrote:

 

 I've never done a balance transfer in my life and don't plan on starting.  I've seen too many people who bragged about how profitable the 0% deals were only to see them in credit balance inferno just a few years later as the slippery slope drove them to larger and larger 0% balances that eventually they were charged interest (and late fees!) on.

 

But how much more expensive would've been to carry that same balance on a LOC instead? I understand the convenience of cash access if you have an emergency like somebody replied or for overdraft protection but then is that how they make their money? Banking on people's desperation/misfortune? I dont know I always thought LOCs as a product had a little bit more prestige than that

 


 

FICO 8: EQ 721 TU 713 EX 720
UTIL: 3%
Discover $14,900
Citi DC $6,200
BoA Cash $20,400
Amex BCE $9,000
Penfed PLOC $5000
Venture One $4500
Freedom $3500
Amex SimplyCashPlus $13,400
BoA Business Cash Rewards $12,500
Message 7 of 24
Valued Contributor

Re: Is the traditional line of credit going obsolete?


@ABCD2199 wrote:

If anything, the 0% offer will only become more profitable for banks than any other marketing offer.

 

For most banks, it costs anywhere from $100 to $250 to acquire new customers.  This includes basic advertising costs but it also includes acquisition costs from things like 0% offers.  The bank's job is to acquire new customers and retain old customers and the cost of doing this hasn't gotten cheaper (more competition).

 

Like all things marketing, everyone will swear they profit from deals but few people actually do.  The human mind is a pro at tricking us into bad math transactions because we get more joy (dopamine) out of new charges and that makes us quickly forget any costs involved in those charges.

 

I've never done a balance transfer in my life and don't plan on starting.  I've seen too many people who bragged about how profitable the 0% deals were only to see them in credit balance inferno just a few years later as the slippery slope drove them to larger and larger 0% balances that eventually they were charged interest (and late fees!) on.

 

0% offers are today's #1 marketing angle for lenders.  They're more valuable than sign up bonuses.


We get virtually daily mails from CITI and Discover for 0 percent offers.  Citi and Discover want people who carry balances. What better way to get them than with zero percent transfer offers.  They also have 3 percent transfer fee so they really aren't 0 percent. With interest rates being so low the last few years they probably have done Ok with those offers.   NFCU had a zero percent offer with 0 transfer fees.  That was a good one.

 

But I agree the way for banks to get you to use their cards are either with 0 percent offers or for sign up bonuses.  Only other way to get people is through getting people with bad credit who have not other option: Capital One.  


I feel like that the Credit companies are preying people's addictions. Getting them hooked with 0 percent offers and free airline tickets and then once they are hooked they jack their rates way up and the people are underwater.

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Former Cards: Lendup L Card, Bank of America Cash Rewards, Capital One Quicksilver
Message 8 of 24
Contributor

Re: Is the traditional line of credit going obsolete?


@frogman1 wrote:

@ABCD2199 wrote:

If anything, the 0% offer will only become more profitable for banks than any other marketing offer.

 

For most banks, it costs anywhere from $100 to $250 to acquire new customers.  This includes basic advertising costs but it also includes acquisition costs from things like 0% offers.  The bank's job is to acquire new customers and retain old customers and the cost of doing this hasn't gotten cheaper (more competition).

 

Like all things marketing, everyone will swear they profit from deals but few people actually do.  The human mind is a pro at tricking us into bad math transactions because we get more joy (dopamine) out of new charges and that makes us quickly forget any costs involved in those charges.

 

I've never done a balance transfer in my life and don't plan on starting.  I've seen too many people who bragged about how profitable the 0% deals were only to see them in credit balance inferno just a few years later as the slippery slope drove them to larger and larger 0% balances that eventually they were charged interest (and late fees!) on.

 

0% offers are today's #1 marketing angle for lenders.  They're more valuable than sign up bonuses.


We get virtually daily mails from CITI and Discover for 0 percent offers.  Citi and Discover want people who carry balances. What better way to get them than with zero percent transfer offers.  They also have 3 percent transfer fee so they really aren't 0 percent. With interest rates being so low the last few years they probably have done Ok with those offers.   NFCU had a zero percent offer with 0 transfer fees.  That was a good one.

 

But I agree the way for banks to get you to use their cards are either with 0 percent offers or for sign up bonuses.  Only other way to get people is through getting people with bad credit who have not other option: Capital One.  


I feel like that the Credit companies are preying people's addictions. Getting them hooked with 0 percent offers and free airline tickets and then once they are hooked they jack their rates way up and the people are underwater.


I totally agree on the marketing side of it, I'm just trying to come up with a scenario where I can justify carrying a balance on a LOC instead of a BT check but I cant, even with the 3% fee after a couple of weeks it's already cheaper. 

 

 

FICO 8: EQ 721 TU 713 EX 720
UTIL: 3%
Discover $14,900
Citi DC $6,200
BoA Cash $20,400
Amex BCE $9,000
Penfed PLOC $5000
Venture One $4500
Freedom $3500
Amex SimplyCashPlus $13,400
BoA Business Cash Rewards $12,500
Message 9 of 24
Established Contributor

Re: Is the traditional line of credit going obsolete?


@ABCD2199 wrote:

If anything, the 0% offer will only become more profitable for banks than any other marketing offer.

 

For most banks, it costs anywhere from $100 to $250 to acquire new customers.  This includes basic advertising costs but it also includes acquisition costs from things like 0% offers.  The bank's job is to acquire new customers and retain old customers and the cost of doing this hasn't gotten cheaper (more competition).

 

Like all things marketing, everyone will swear they profit from deals but few people actually do.  The human mind is a pro at tricking us into bad math transactions because we get more joy (dopamine) out of new charges and that makes us quickly forget any costs involved in those charges.

 

I've never done a balance transfer in my life and don't plan on starting. ( +100)  I've seen too many people who bragged about how profitable the 0% deals were only to see them in credit balance inferno just a few years later as the slippery slope drove them to larger and larger 0% balances that eventually they were charged interest (and late fees!) on.

 

0% offers are today's #1 marketing angle for lenders.  They're more valuable than sign up bonuses.

However have a better chance of you slipping down the slope as compared to the sign-up bonus. Banks are not looking out for you, guess who they are thinking about !


 

  
Fico Scores 840 . . . AAoA = 8 yrs . . . AoOA = 22 yrs . . . Garden (18) . . . * Credit Limits Capped *
Message 10 of 24