Personal Finance

Line of credit Question

  • Last Updated:
  • Oct 27th, 2019 11:30 am
Newbie
Feb 25, 2014
23 posts
3 upvotes
Montreal

Line of credit Question

I was reading the terms and conditions from my tangerine loc.

I've had it for a few years but never used it.
I'm considering using it now but there's something in the terms and conditions I'm not quite sure about.

"You can't use the Line of Credit to make circular payments, for example, you must not make Advances from the Line of Credit to deposit them to another account and then withdraw funds from that account to redeposit to them to the Line of Credit."

So if I transfer a few grand into checking account, use some of it, and keep some of it in the checking account, later on if I I have to make a payment on the loc, if I transfer funds from this checking account to the loc, that's a circular payment, since I still have funds from the loc in that account?

I mean I understand that they don't want you to pay off credit with credit, but what if I just want to give it back? . . .

I see there's all these posts about ppl who took advantage of a 90 day promotion they had with 0% interest, putting the money into a savings account for the 90 days then giving it back at day 90. . .

Isn't that exactly : "Making advances from the Line of Credit to deposit them to another account and then withdraw funds from that account to redeposit to them to the Line of Credit" ?

I'm a bit confused.
7 replies
Deal Expert
Aug 22, 2011
41801 posts
30056 upvotes
Center of Universe
Transferring to a chequing or savings account is perfectly fine.
Newbie
Feb 25, 2014
23 posts
3 upvotes
Montreal
Right, but if I have money in that checking account from the loc, when I make payments from that checking account to the loc is that not what they describe as a circular payment?
Sr. Member
May 24, 2018
799 posts
757 upvotes
Ontario
I think you already get the spirit of the term
...they don't want you to pay off credit with credit
So to me - the term "another account" probably means another (credit-based) account & not referring to chequings and savings accounts.

[ But then things are never simple - sometimes there may be an overdraft provision (which is a credit-based component) to a chequing account. ]
Deal Fanatic
Jan 21, 2014
8517 posts
6261 upvotes
It’s fine moving to checking account and back. I did that all the time. I have an EFT from another bank that I know it would arrive by the evening. So in the morning, I transfer money from LOC to checking and withdraw it. Once it arrives later, I move it back to LOC, no interest charge and I got to use the money early
Deal Expert
Aug 22, 2011
41801 posts
30056 upvotes
Center of Universe
hwyc2007 wrote: I think you already get the spirit of the term



So to me - the term "another account" probably means another (credit-based) account & not referring to chequings and savings accounts.

[ But then things are never simple - sometimes there may be an overdraft provision (which is a credit-based component) to a chequing account. ]
Correct, at least with RBC, CCs are classified as an account, in which you "transfer" money to it when making a payment.
Deal Addict
Nov 6, 2015
1353 posts
1022 upvotes
Guelph, ON
I believe you are quoting Tangerine? I have heard from multiple people in forums say they contacted Tangerine to get clarification and the answer was that "account" didn't mean a chequing/savings account.

As you said, the most likely "first stop" for using you LOC is a chequing account (from there you are likely to write cheque or withdraw cash to actually use the LOC). And when you pay down a LOC, the money is likely to originate from that account (i.e. because that's where you pay cheque gets deposited). So if they literally interpreted that as an "account" in their circular payments rule, it would virtually make their LOC unusable.
Deal Addict
Nov 14, 2010
1090 posts
354 upvotes
I think of particular concern on the circular payment, would be if withdrew money from the LOC, just to pay off the payment for the LOC.

Eg: you had a minimum payment of $56.34 on your LOC, so you withdraw $60 from your LOC to your chequing, then deposit it back in your LOC to count as a "payment", but without actually paying down anything.

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