Line of Credit FAQ
The following are the most frequently asked questions regarding how the Line of Credit (LOC) works. Understanding the answers will help you manage your LOC properly.How does the Line of Credit work?
Overdraft protection: The LOC will extend to cover checks, bill payments, and electronic transfers (ACH) written on your checking account when there are insufficient funds in that account.
Alternatives VISA debit card: Debit card transactions clear your account like a check, and will activate the LOC as described in overdraft protection.
Cash: You can get cash directly from your LOC with a cash withdrawal form at Alternatives. Specify that you are requesting funds from your LOC.
The amount available in LOC must be sufficient to cover the transaction. You will be approved for a specific limit between $300 and $20,000.
What is my monthly payment amount?
The minimum monthly payment is $35 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 would 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 Phone Access, Online Access, or contact Member Service.
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 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 Alternatives FCU make automatic payments for me each month?
Yes, if you request and authorize this free service, we will transfer a payment from any Alternatives account.
How does the LOC affect automatic overdraft transfers from savings to checking?
Available funds from the LOC will be used first. Once all available funds are used, the savings will then cover checks and bill payments with a $5 transfer fee per transaction. Savings transfers will be from the prime savings account only. Debit card transactions will not advance from the savings account. If no funds are available in the LOC or savings, and you are eligible for our discretionary Overdraft Privilege, we will then cover the charge for the $25 fee. If you are not eligible for Overdraft Privilege, the transaction will be returned and you will be charged a $25 fee.
Could you give me an example of how the LOC works?
Example: You have a $500 available balance on your LOC. You have a checking account balance of $100 and a bill for $300. When you pay the bill with a check (or Alternatives VISA Debit Card) your Line of Credit is activated and advances $200 to your checking account, bringing your checking balance to $300. The check (or debit transaction) clears your 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?
The 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 .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 usually as “ID 25 – Line of Credit (Open End)”. Under transactions, "Loan Advance" designates a Line of Credit loan advance to your checking account. Loan payments will also be listed. When a check or an Alternatives VISA Debit Card transaction activates the LOC, the checking portion of the statement will show "Deposit Transfer." This is the loan advance being deposited to your checking account.
How much does the LOC cost?
There is no annual fee for the LOC. The APR (Annual Percentage Rate) is 14.25%.
How can I increase the credit limit of my LOC?
You may initiate a request to increase your LOC – contact us by phone, online, 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 billing rights appears in the LoanLiner Credit/Security Agreement.