US Bank PLOC Question

[Anonymous]

Hi, there, 

I have a very simple question. (I think). 

I was recently approved for a US Bank Personal Line of Credit ($12,000) limit. 

I would like to pull $625/month from the PLOC for one year, to amass an extra $7,500 in savings. 

Is the PLOC a good way to do this? 

How much does it cost to do this, assuming I pay it off every month? 

Thank you!

[Anonymous]

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@Anonymous wrote:

Hi, there, 

I have a very simple question. (I think). 

I was recently approved for a US Bank Personal Line of Credit ($12,000) limit. 

I would like to pull $625/month from the PLOC for one year, to amass an extra $7,500 in savings. 

Is the PLOC a good way to do this? 

How much does it cost to do this, assuming I pay it off every month? 

Thank you!

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Without knowing the APR you're approved for, the cost portion of your question can't be answered.

You also said that you'd "pay it off every month."  If that's the case why not save the amount directly from your income (assuming you have a monthly income) and avoid possible interest payments?

[Anonymous]

It is @ 11.75%. 

I'm mostly curious how the line works, how often it accrues interest, etc. 

Hope this helps, Peter

[dragontears]

Generally LOC don't have a grace period for interest like a credit card does, so you would start paying interest as soon as you use it.
At 11.75% APR is 0.032% per day.
$625 × 0.032% = $0.20/day if you waited 30 days it would be $6.04/month in interest

[Anonymous]

Thank you. I think I understand. 

So the PLOC is mostly good for short term (a few days to a week) cash flow coverage, is that correct?

P

[Revelate]

Basically when we are talking personal financing.

If you are short cash it is (usually) cheaper to float it on a PLOC than a credit card.

I was sitting on my tookus for much of 2018: started using the HELOC to refinance the CC’s, and then when things ran really short in my cash position simply covered it with the Penfed PLOC I had available.

Paid that all off with a vengeance once I had my income flowing again but always finance things at the lowest APR you have access to. If I had to do it all again I might have just opened up a 0% intro offer and use that... I should go see what that laziness cost me in interest that year but I could have used that before running up the HELOC (which is at Prime to be fair but non-zero)

[Anonymous]

thank you

[Anonymous]

Bank of America, Citibank, Discover, and possibly others allow you to do 12-month ACH transfers from your credit card to your checking account for a 3% flat fee.  That's better than any PLOC rate.

[Revelate]

And then you are paying interest on that immediately as you would for any other cash advance?

3% fee + 16% APR, unless I am missing something which is always possible this makes no sense vs a PLOC.

Also not even sure in the 3% and no interest case: if you aren’t planning to finance that for the full period, typical PLOC for easy napkin math is at 12% which means if your float term is less than 3 months use the PLOC.

It’s just fundamentally a different use case: my own PLOC use was under 30 days, would have cost me call it $60 more to use a 3% offer.