After getting hit with so many NSF fees this year, a reader suggested I sign up for a line of credit at my CU to help mitigate some of the fees. And that’s what I did.
It varies with every bank, but my CU allowed me to open a new account once I had logged into my account. It took probably less than a minute to apply for it. The bank has all of your info already. The biggest question mark was how much credit I wanted. I chose $10,000 since I figure that’s how much my CU would give me without giving me a hard time. Plus, most of my NSF’s have been <$10K. I usually know when the big payments are due. My CU did HP my credit for the application. Naturally, I didn’t get an immediate approval.
After a few days, I got an email saying I was approved for a $10K LoC with a 10% APR. That wasn’t the lowest rate nor was it the highest rate. I didn’t care since I can usually get my balance into positive territory after a few days.
How it works
A month after I was approved, sure enough, I had forgotten about an autopay and BAM! Instead of getting hit with an NSF by the cc and my bank this time around, the $3,000 payment swept from my LoC and paid the cc. My checking account was something like a negative $1500 and my LOC balance was $1500. I then immediately went to deposit some checks and on the next business day, when the checks usually clear my checking account, it automatically paid off the LOC, and I now had a positive balance again in my checking account.
There usually isn’t any fees when you ‘sweep’ money from the LoC. Usually you get hit with the interest on the money you’ve borrowed. I was looking to see how much I would be charged for that 1 day of $1500 that I borrowed, but I was never hit with any fees. I’m not sure if it’s because I paid it off within a day or what, but I’m not complaining.
If you’ve been getting with NSF fees of late, even if you’ve promised yourself you’ll be more organized, it doesn’t hurt to open up a LOC at your bank so you don’t get slapped with $50+ in combined NSF fees.