Line of Credit FAQ
The following are the most frequently asked questions regarding how Line of Credit (LOC) works. Understanding the answers will help you manage your LOC account properly.
How does each of the LOC programs work?
1) Overdraft protection: The LOC will extend to cover drafts written on your share draft account when there are insufficient funds in that account.
2) Alternatives VISA Debit Card: debit card transactions clear your account like a share draft (check), and will activate the LOC as described in overdraft protection.
3) Cash: You can get cash directly from your LOC with a cash withdrawal form at the Credit Union. Specify that you are requesting funds from your LOC.
The following conditions apply in all of the above cases:
- The amount available in LOC must be sufficient to cover the transaction. You will be approved for a specific limit between $500 and $20,000.
- Payments on the LOC loan balance and all other loans at the Credit Union must be up to date. If any loan is delinquent, the LOC may be blocked, no matter how much credit is available.
What is my monthly payment amount?
The minimum monthly payment is $35.00 or 3% of the outstanding loan balance of the LOC, whichever is higher. You may pay as much of the LOC above the minimum as you'd like. Interest is charged daily, so your LOC payoff amount increases each day there is a balance.
When is my payment due?
If you have a LOC balance at the end of one month, you have a payment due by the end of the next month. Your monthly statements, available after the first of each month, show any LOC activity. If you would like to check your balance between statements, use Fortune Teller, CU@Home, or ask any teller. Paying early decreases your balance, thus decreasing the total interest you pay.
If I make more than the minimum monthly payment can I skip the next payment?
No. A minimum monthly payment is due for every month the LOC has a non-zero balance.
What if I forget to make a payment?
The LOC may be blocked if a payment is overdue. In fact, the LOC may be blocked if ANY loan is overdue. Since overdraft fees are $25 per check, you will want to be sure you make your payments on time.
Can the Credit Union make automatic payments for me each month?
Yes, if you request and authorize this free service, we will transfer a payment from any savings account.
Will my LOC extend to more than one of my share draft accounts?
Yes, if you'd like, and the other share draft account is under the same member number. There are several possibilities in using LOC in more than one share draft account. Discuss your needs with your Loan Officer so your account is set up to best suit your needs.
How does LOC affect automatic overdraft transfers from savings to share draft (checking)?
Available funds from LOC will be used first, and then any funds in savings, should that become necessary. Remember, if you have not made your monthly payment, the LOC may be blocked. Automatic transfers from savings to cover drafts written on an account without sufficient funds are accompanied by a $5 charge. Transfers are from base savings (A) only.
Could you give me an example of how LOC works?
Example: You have a $500 available balance on your LOC. You have a share draft (checking) balance of $100 and a bill for $300. When you pay the bill with a share draft/check (or Alternatives VISA Debit Card) your LOC is activated and advances $200 to your share draft/checking account, bringing your share draft/checking balance to $300. The draft (or debit transaction) clears your share draft/checking account (leaving a balance of $0) and results in a $200 LOC loan balance. You still have $300 credit available in your LOC.
How is interest figured?
LOC interest rate is 14.25% APR. The daily interest rate, then, is 14.25% divided by 365 days/year = 0.039041% per day. In the above example, say the $200 loan was advanced on the 20th of the month. Your LOC loan payment is due on the last day of the following month. If you paid it on the due date, your LOC had a loan balance for 40 days. $200 loan balance x 40 days x 0.039041% daily interest rate = $3.12 interest charge.
Where do I find LOC on my statement?
The LOC transactions will appear on your regular monthly statement under the suffix your Line of Credit is set up on, and will say LOAN SUFFIX " " - LINE OF CREDIT. "Advance" designates a Line of Credit loan advance. Loan payments will be listed. When share drafts/checks or the Alternatives VISA Debit Card activates the LOC, the share draft portion of the statement will show "Tfr Dep." This is the loan advance being deposited to your share draft account.
How much does LOC cost?
There is NO annual fee for the LOC. The Annual Percentage Rate is 14.25%.
Must I reapply annually for LOC?
No. Your LOC is automatically renewed. An annual review of all LOC accounts is undertaken by our staff.
How can I increase the credit limit of my LOC?
You may initiate a request to increase your LOC with an application - online, by mail, or in person.
Where are my billing rights completely explained?
The reverse side of every statement explains how to protect your credit rights. A full Truth-in-Lending Disclosure including your billing rights appears in the LoanLiner Credit/Security Agreement.
