Keep it open while they are still giving it to u .... the rate will drop and 2.5 % u will be paying could pay off maxing your Regiserted investments and such and tax time... pay it off and in the long run make money....
Need advice re: line of credit
- Thread starter 1HandInMyPocket
- Start date
I don't know if anyone suggested this or not, but to avoid the Inactive fee, just use it for $100.00 then put it back in the next day.
There, no inactive fee.
There, no inactive fee.
You still will need to pay the interest, however, it will be fuck all.tboy said:
You might as well take out 300, call your favourite SP and then pay it back when due. Probably would be about $301.00 when due.
I'm certainly no defender of the banks, but there is some reasonable rationale behind the fee. It costs the bank some amount of money (although probably not the whole $35) to maintain the account from a purely administrative/technological perspective. They're entitled to recover that cost and even make a small profit on the account. If you're not using it, and paying interest, then they're "losing" money. Remember, this is not like a fee on a checking or savings account where they're charging you for the privilege of leaving your money with them (those fees are abhorrent). These accounts have no value to them unless you actually use them.
That said, as LaRue suggested, if you're a good customer, particularly one with a number of other "profitable" (from the bank's perspective) accounts, asking them to waive the fee would be reasonable and just might work.
You could also "shop around" and find competitive LOC accounts with no fees and "threaten" to take your business elsewhere. Again, more effective if you have multiple accounts, but as someone already mentioned, this can be a pain in the ass to actually do. And the new bank might very well impose a fee on your LOC a year later.
Beyond that, as others have stated, you need to think about whether it is worth $35 a year to have the "peace of mind" associated with the available credit.
If you closed that account to save the $35 dollars, lost your job a month later, and then couldn't get credit because you didn't have a job, would it have been worth the $35 savings?
As far as the "phony" transaction approach, there are usually provisions that prevent this, particularly when it involves depositing the funds into an account at the same bank. Beyond that, there may even be a provision that you pay a minimum amount of interest before the activity fee is waived.
My advice?.....Pay the fee and get the $35 back by going for a topless rub instead of a body slide one night.
That said, as LaRue suggested, if you're a good customer, particularly one with a number of other "profitable" (from the bank's perspective) accounts, asking them to waive the fee would be reasonable and just might work.
You could also "shop around" and find competitive LOC accounts with no fees and "threaten" to take your business elsewhere. Again, more effective if you have multiple accounts, but as someone already mentioned, this can be a pain in the ass to actually do. And the new bank might very well impose a fee on your LOC a year later.
Beyond that, as others have stated, you need to think about whether it is worth $35 a year to have the "peace of mind" associated with the available credit.
If you closed that account to save the $35 dollars, lost your job a month later, and then couldn't get credit because you didn't have a job, would it have been worth the $35 savings?
As far as the "phony" transaction approach, there are usually provisions that prevent this, particularly when it involves depositing the funds into an account at the same bank. Beyond that, there may even be a provision that you pay a minimum amount of interest before the activity fee is waived.
My advice?.....Pay the fee and get the $35 back by going for a topless rub instead of a body slide one night.
The cost of using a line of credit is f_all compared to a credit card. Carry $100 over on your credit card and it could cost you $50-$100 in interest since they go back to time of purchase, apply it to everything on the statement, and charge you around 20%. Do the same on a LOC and you will pay 25 cents in interest (3% on $100 for 1 month).
Don't give up a line of credit in today's environment. You may find something you want to do with it...investment even. At some point we will hit bottom...and if you can invest a bit regularly on both sides of bottom you will do well I think.
Don't give up a line of credit in today's environment. You may find something you want to do with it...investment even. At some point we will hit bottom...and if you can invest a bit regularly on both sides of bottom you will do well I think.
When I had an LOC the only time I paid any interest was if I kept a balance (negative) from one month to the next. If I remember there was a small service charge per transaction but I remember it being so small as to be non-existant.james t kirk said:
So yeah, it may cost him a dollar to take the money out but the same could be true if he used interac at an off brand ATM.
Word of warning however: If the OP's bank is anything like TD they can and will cancel your LOC without telling you. Oh, they'll tell you, but maybe a week or so after they've cancelled it. To rub it in, they'll send you a letter back dated to the date they cancelled it. (just to rub salt in the wound lol).
I'd be amazed if it was still there because I opened a nonsecured LOC from BMO about a year aog when they sent me a teaser in the mail for a LOC at Prime +1.00.Tony2Tap said:
For Nonsecured, I thought that that was a pretty good deal, unbelievable in fact. I checked it out and it was the truth. I signed up, never used it till about 2 months ago. When I tried to access the account, they had suspended it. All it took was a call to the bank.
I took out 500 for the hell of it, called Samantha of Toronto and zip diddy doo dah day.
Paid about $503.00 back to BMO the next month.
I just might try that again soon.
here here!james t kirk said:
it's not like the $35 is going to cut into your hobbying...
we're talking $2.92/month, 9.5 cents/day
you'll be extremely happy you didn't close it if you need it...
I think the bank also has to allocate some of its regulatory capital against the LOC, so our TERBIE friend is tying up some of the TD's valuable capital.viking1965 said:
Depends on your needs
It depends on how you are with revolving credit.
If you're not so good with it, I don't recommend keeping it or at least not at that credit limit. You may want to reduce the limit to something you feel comfortable with.
If you are ok or good with revolving credit, I recommend keeping the Line of Credit because it is a great source of back up funds which can cater to your every needs. You can leverage it and invest it, you can use it to reduce any borrowing balances, ie. Credit card debt @ 18.5% vs LOC @ Prime +(and this depends on your credit rating and LOC limit). In any case, if you are not the one to carry high balances on ALL your credit cards, I say keep the LOC for any backup or emergency uses.
One thing they teach you in ECON is borrow when interest rates are low, lend when the rates are high. Of course this only applies if you're financially stable meaning that you are not in any serious financial burden or distress.
If you're interested in making a large return for your LOC pm me and I can show you ways to generate high returns.
Cheers!
It depends on how you are with revolving credit.
If you're not so good with it, I don't recommend keeping it or at least not at that credit limit. You may want to reduce the limit to something you feel comfortable with.
If you are ok or good with revolving credit, I recommend keeping the Line of Credit because it is a great source of back up funds which can cater to your every needs. You can leverage it and invest it, you can use it to reduce any borrowing balances, ie. Credit card debt @ 18.5% vs LOC @ Prime +(and this depends on your credit rating and LOC limit). In any case, if you are not the one to carry high balances on ALL your credit cards, I say keep the LOC for any backup or emergency uses.
One thing they teach you in ECON is borrow when interest rates are low, lend when the rates are high. Of course this only applies if you're financially stable meaning that you are not in any serious financial burden or distress.
If you're interested in making a large return for your LOC pm me and I can show you ways to generate high returns.
Cheers!
I got the letter today from TD. I haven't used it since 1999. So I will cancel it. Further they raised the rate from prime +3.25 to +3.5. I have another line of credit at the Royal that I haven't used in 5 years with a better rate and a higher limit.1HandInMyPocket said:
It never hurts to keep one in your back pocket. I work for a financial institution (one of the big 6 banks) and I've seen many clients who cancelled their LOC (Line of Credit) and later tried to apply for one when they needed it and was denied.hungry said:
You won't realize what a great product a LOC is until you really need it.
In any case, Prime +3.5 ain't bad either, that's 6.5% (assuming TDCT prime is 3.00%). Take a look at car financing rates, as well as personal loans. 6.5% is not too shabby to borrow unsecured.
If you're looking for the lowest rate for a LOC, pm me and I'll show you how you can get it at Prime + 1%. And yes there are LOC @ prime, but those are for individuals who obtained one before the market went bad.
Do reconsider, it doesn't cost you anything to have it, that is if it doesn't go dormant. Especially for those who are aging and income doesn't look like it will continue to increase but rather decrease. Don't let go of the LOC, eligibility requirements will be quite difficult if your income decreases!
Cheers!
Thanks to all who responded. Here's the prologue.
I went to the bank and spoke to the help desk about the situation and asked if I need to speak to a teller or a personal banker, however she was able to help me on the spot as she already knew about the changes to their LOC.
She recommended to transfer $1 from my LOC to my chequing account, then do the reverse (immediately). She did set up my debit card so that I could do this process at the bank machine, apparently a card can only have 3 accounts attach to it (chequing/savings/other). I attached my LOC to "other" to avoid any problems if I purchased something with by debit and instead of pressing "checquing" I pressed "savings" and thus accidently purchased something with my LOC.
FYI, the lady at the help desk also told me that to apply for a LOC would require ~$150 fee, just to apply.
I went to the bank and spoke to the help desk about the situation and asked if I need to speak to a teller or a personal banker, however she was able to help me on the spot as she already knew about the changes to their LOC.
She recommended to transfer $1 from my LOC to my chequing account, then do the reverse (immediately). She did set up my debit card so that I could do this process at the bank machine, apparently a card can only have 3 accounts attach to it (chequing/savings/other). I attached my LOC to "other" to avoid any problems if I purchased something with by debit and instead of pressing "checquing" I pressed "savings" and thus accidently purchased something with my LOC.
FYI, the lady at the help desk also told me that to apply for a LOC would require ~$150 fee, just to apply.
What type of bank do you deal with? "Loan Shark Bank Of Canada"??? *LOL* No, there should never be a fee to apply for anything... a LOC is free - period. Sounds like you're getting scammed, or the customer service rep has no clue what she's talking about.1HandInMyPocket said:
S
superman
Dont forget that the banks will factor in your line of credit if you apply for a loan or a mortgage.
It's called service debt load ratio and is the ratio of monthly finacial commitmants versus gross monthly income.
The banks allow between 35-42% of your gross monthly income to be used for loans credit and mortgage payments. If your monthly debt load ratio is higher than this they will probably deny your application.
What alot of people don't know is that they assume you will use all of your line of credit up and calculate your minimum LOC payment based on the full/ or possible amount.
With the credit industry tightening up, they will be less likely to approve a borderline application now.
You may want to total up your monthly debts and calculate what percentage of your gross monthly income they represent. Then recalculate factoring in your line of credit minimum monthly payment based on using all of the line of credit that is available to you.
If you know what your SDR is you can increase or decrease your LOC to keep you within the acceptable SDR limits which vary from financial institution to institution.
Your beacon score or credit score is used to determine what percentage above prime we pay for our lines of credit.The higher the number the better a credit risk you are. A score of 680 I think is average, 710 or higher being fantastic.
If your score improves enough you can ask the branch to lower the rate based on an updated credit report available upon request from organizations like equifax on line or at it's office on Sheppard just east of Yonge.
I set up my business account with a business branch and get alot better service than I ever did at a public branch. I don't know if non business owners can use these branches though.
Hope this helps.
It's called service debt load ratio and is the ratio of monthly finacial commitmants versus gross monthly income.
The banks allow between 35-42% of your gross monthly income to be used for loans credit and mortgage payments. If your monthly debt load ratio is higher than this they will probably deny your application.
What alot of people don't know is that they assume you will use all of your line of credit up and calculate your minimum LOC payment based on the full/ or possible amount.
With the credit industry tightening up, they will be less likely to approve a borderline application now.
You may want to total up your monthly debts and calculate what percentage of your gross monthly income they represent. Then recalculate factoring in your line of credit minimum monthly payment based on using all of the line of credit that is available to you.
If you know what your SDR is you can increase or decrease your LOC to keep you within the acceptable SDR limits which vary from financial institution to institution.
Your beacon score or credit score is used to determine what percentage above prime we pay for our lines of credit.The higher the number the better a credit risk you are. A score of 680 I think is average, 710 or higher being fantastic.
If your score improves enough you can ask the branch to lower the rate based on an updated credit report available upon request from organizations like equifax on line or at it's office on Sheppard just east of Yonge.
I set up my business account with a business branch and get alot better service than I ever did at a public branch. I don't know if non business owners can use these branches though.
Hope this helps.
I have two lines of credit at prime plus 2, but I never use them since I get a rate of 1.9% to 2.9% from other banks.
In this economic environment, cash is king. Do what the banks/companies are doing and hoard as much cash as possible. In fact, companies have been drawing down credit lines that they don't need for months. Forget what people like Suze Orman is advising (paying down debt), I say everyone should withdraw as much as possible from your LOCs and stick it in a short term GIC. Yes, you will pay some interest (offset by interest earned through GIC) and in ordinary times this would make absolutely NO sense, but we are not in ordinary times.
Before bashing, consider this...if you take a look at what is happening in the US, banks are closing down unused portions of LOCs. I agree with reducing HELOCs due to reduced values of houses, but this is occuring with all LOCs. It looks like this recession is going to be a tough one. Getting fired in ordinary times is tough, but in ordinary times there are jobs out there. Now, if you get fired, no one is hiring and there is WAY more competition, so it may be a LONG time before finding another gig. Chances are, when you need it the LOC will not be there, or significantly reduced. I know most of you are thinking, I will just sell stock, but look at the market now? Guess what?!? RBC just came out with a report and based on historical stats, the TSX will go down another $1,500. If you know a storm is coming, you would stock up on supplies that you need... Well the eye of the financial storm is almost here, it all about self preservation and protecting your family.
Before bashing, consider this...if you take a look at what is happening in the US, banks are closing down unused portions of LOCs. I agree with reducing HELOCs due to reduced values of houses, but this is occuring with all LOCs. It looks like this recession is going to be a tough one. Getting fired in ordinary times is tough, but in ordinary times there are jobs out there. Now, if you get fired, no one is hiring and there is WAY more competition, so it may be a LONG time before finding another gig. Chances are, when you need it the LOC will not be there, or significantly reduced. I know most of you are thinking, I will just sell stock, but look at the market now? Guess what?!? RBC just came out with a report and based on historical stats, the TSX will go down another $1,500. If you know a storm is coming, you would stock up on supplies that you need... Well the eye of the financial storm is almost here, it all about self preservation and protecting your family.
