@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.
@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.
@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.
@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!