Personal Finance

Low interest credit card vs. Line of credit

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  • Mar 5th, 2018 10:49 pm
[OP]
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Low interest credit card vs. Line of credit

Why is it harder to get a line of credit compared to low interest credit card?

For example Amex has a fixed 8.99%, no AF card with basic requirements. Applied and approved in seconds online for 10k limit.

While applying for a just $5k line of credit with the bank you have to provide supporting documents (income, employment, savings, etc) and the interest is bit lower or even higher than the Amex in example above.

Appreciate your inputs!
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Good question.
LOC is usually lower interest than even 9%, but the way the prime interest is creeping up the gap will be narrowed
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barmadrid wrote:
Mar 3rd, 2018 3:01 pm
While applying for a just $5k line of credit with the bank you have to provide supporting documents (income, employment, savings, etc) and the interest is bit lower or even higher than the Amex in example above.
That wasn't my experience. I have a LOC with one bank which was a preapproved offer - I just accepted the offer. I had an investment account with the bank at the time.

The other LOC I have was from an offer where if you open many accounts (chequing, LOC, credit card) you would get a freebie.

In both cases, aside from stating my income and providing my SIN (presumably the bank did a credit check), I provided no documents or other info.

I was a few years ago though..
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Oh the irony, and the question in OP has got me wondering the same thing.

I have an MBNA Prestige Line, which is MBNA's grandfathered flavour of a LOC. They couldn't even qualify me for the extra CL (was in school, they took some CL from my spender card with them at the time). Has a 8.97% interest rate. I didn't care any about the interest rate at the time, I liked it for the no $7.50 cash advance fee. Very useful when travelling internationally.

Though that card is no longer available, MBNA now offers True Line (comparable to the AmEx mentioned by OP), and Platinum Plus (for balance transfers). I think the True Line is platinum as well, meaning either card could be had with $15k+ annual income.

I think the lowest income for a uLOC is $40k (and if barely making $40k one has high interest debt anywhere else, meaning they'd actually benefit from a uLOC, then it'll likely not get approved).

I think everyone should get a LOC (at least a uLOC) with their bank, even if interest rates are high. It offers a lot of flexibility and total convenience (chq account with massive overdraft).

For those who can't get a uLOC, I would not recommend borrowing money from any source that'd leave you with high interest debt. Grab an MBNA PP if you have to (if anything it's an awesome outlet to pay off debt).
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M8Rxmjsik wrote:
Mar 3rd, 2018 4:10 pm
That wasn't my experience. I have a LOC with one bank which was a preapproved offer - I just accepted the offer. I had an investment account with the bank at the time.

The other LOC I have was from an offer where if you open many accounts (chequing, LOC, credit card) you would get a freebie.

In both cases, aside from stating my income and providing my SIN (presumably the bank did a credit check), I provided no documents or other info.

I was a few years ago though..
Pre-approved is different. It means you're already approved and you just have to accept the offer.

Applying as opposed to Pre-Approved is a different deal all together
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titaniumtux wrote:
Mar 3rd, 2018 8:39 pm
Oh the irony, and the question in OP has got me wondering the same thing.

I have an MBNA Prestige Line, which is MBNA's grandfathered flavour of a LOC. They couldn't even qualify me for the extra CL (was in school, they took some CL from my spender card with them at the time). Has a 8.97% interest rate. I didn't care any about the interest rate at the time, I liked it for the no $7.50 cash advance fee. Very useful when travelling internationally.

Though that card is no longer available, MBNA now offers True Line (comparable to the AmEx mentioned by OP), and Platinum Plus (for balance transfers). I think the True Line is platinum as well, meaning either card could be had with $15k+ annual income.

I think the lowest income for a uLOC is $40k (and if barely making $40k one has high interest debt anywhere else, meaning they'd actually benefit from a uLOC, then it'll likely not get approved).

I think everyone should get a LOC (at least a uLOC) with their bank, even if interest rates are high. It offers a lot of flexibility and total convenience (chq account with massive overdraft).

For those who can't get a uLOC, I would not recommend borrowing money from any source that'd leave you with high interest debt. Grab an MBNA PP if you have to (if anything it's an awesome outlet to pay off debt).
I considered that as well, but it has a fixed rate of 24.99% for cash advances. Also, MBNA TrueLine charges 1% fees for each cash advance while the AMEX Essential $2.75 (The fees will be lower if you wish to take cash of over $300 in favor of AMEX).
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Dec 28, 2017
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Amex charge cards requires full payment each month while loc requires a set % only (like 4% of balance) .. then you can withdraw it back without cash advance charge.

That is why banks ask for alot of information, because you can essentially pay interest only month after month.

So its not banks asking for too much stuff vs 5 mins online with Amex. It's just the nature of 2 different products
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ayufan wrote:
Mar 4th, 2018 7:25 am
Amex charge cards requires full payment each month while loc requires a set % only (like 4% of balance) .. then you can withdraw it back without cash advance charge.

That is why banks ask for alot of information, because you can essentially pay interest only month after month.

So its not banks asking for too much stuff vs 5 mins online with Amex. It's just the nature of 2 different products
Amex essential isn't a charge card. It's a credit card, and has minimum payments monthly like a a line of credit.

OP's question still hasn't been answered
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User455957 wrote:
Mar 4th, 2018 11:04 am
OP's question still hasn't been answered
Because different departments look at things from a different perspective. A line of credit is a long term thing, the 'low' interest credit cards are still credit cards so fall under those underwriting procedures.

Lots of things in life make no sense in isolation. Why does MBNA offer the Platinum Plus at effectively 2.xx% interest (not applying for a new one each time, just paying off and re-borrowing), but send adverts for their TrueLine at 7%? Why does the same owner, TD, send me stuff for 1% balance transfer offers but with a 3% fee - for *six months*?

The Platinum Plus must make TD money when people don't pay it off at the end of the low interest period and they are stuck paying 20% or 25% or whatever - even for a couple of months it wipes out the savings.

So, I guess, the answer is 'statistics'. The banks slice and dice statistics and see where they can make money. Knowing that *enough* of the people will screw up the 'low' rates of these special products to make it worth their while. Just the same as Amex can hand out $500 in sign up bonuses - those that cancel, use the points to the maximum are in the minority.
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barmadrid wrote:
Mar 3rd, 2018 9:10 pm
I considered that as well, but it has a fixed rate of 24.99% for cash advances. Also, MBNA TrueLine charges 1% fees for each cash advance while the AMEX Essential $2.75 (The fees will be lower if you wish to take cash of over $300 in favor of AMEX).
Times have changed, don't know of any good cash advance cards at the moment. I wish I had one on visa network.
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titaniumtux wrote:
Mar 4th, 2018 12:42 pm
Times have changed, don't know of any good cash advance cards at the moment. I wish I had one on visa network.
My RBC has an ongoing offer of 2% interest for a year . Even has the option of dumping $ into my bank account. I don't need it though, so there it sits
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User455957 wrote:
Mar 4th, 2018 1:10 pm
My RBC has an ongoing offer of 2% interest for a year . Even has the option of dumping $ into my bank account. I don't need it though, so there it sits
That's for balance transfer, right? If I want BT, I can churn an MBNA PP.

I would like a card on VISA network for cash advances at ATM's in travel destinations where MC won't work.
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Yea, I got pre-approved for my 15k LOC, and I didn't even applied. I didn't even banked with the bank who offered me the LOC in the past year. But I had a CC with them in the past.

All I had to do is phone them and tell them I accept their LOC and that was it.
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See I have multiple low interest credit cards that I use like a line of credit essentially...but low interest for these cards is between 10.9%-14.99%, two of them did actually ask for income verification like an LOC while the other 2 I was able to convert a high interest card to a lower one and 2nd one is the crumby MBNA trueline with the 24.99 interest on cash advances. I tried for LOC twice actually and was denied in the mid 600s with 50K+ income, so these cards are the only thing I want to carry a balance on for an emegency such as something going wrong with my house. I did get approved for many other cards and overdraft after trying for an LOC so I think its the hardest to obtain for some that just dont have the higher scores
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mmikeman wrote:
Mar 4th, 2018 2:56 pm
See I have multiple low interest credit cards that I use like a line of credit essentially...but low interest for these cards is between 10.9%-14.99%, two of them did actually ask for income verification like an LOC while the other 2 I was able to convert a high interest card to a lower one and 2nd one is the crumby MBNA trueline with the 24.99 interest on cash advances. I tried for LOC twice actually and was denied in the mid 600s with 50K+ income, so these cards are the only thing I want to carry a balance on for an emegency such as something going wrong with my house. I did get approved for many other cards and overdraft after trying for an LOC so I think its the hardest to obtain for some that just dont have the higher scores
Yeah, what I really don't get is for example I have a credit card with RBC since 2009 started with only $500 limit and now it is $34k limit! which I use a lot and never a missed payment. Credit score is around 800. Yet they are scared of giving a $5000 LOC.

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