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Cash Line of Credit

A cash line of credit is a bank product that gives borrowers a line of credit attached to their checking account.

The cash line of credit gives depositors a predetermined level of credit that they can access through their checking account. This credit can be used to get cash from ATM machines or the bank tellers hence the term cash line of credit.

It can also be used to provide overdraft protection by covering checks and other payments when they exceed the amount of money in the account. A borrower could also use it to cover day to day expenses when they are short of cash.

Advantages to Cash Line of Credit

The advantages of a cash line of credit for the average person are quite obvious. A person who has limited income or an unstable income could use it to avoid overdraft fees which can be very expensive. It also makes a source of credit to cover day to day transactions available.

Since cash lines of credit usually have lower interest rates than credit cards they will cost less than credit cards. A person should be able to take advantage of a cash line of credit by using their debit card.

Another advantage to a cash line of credit is that it can be used to withdraw cash from a bank’s ATM machines or at stores when purchases are made. This can give a person a source of cash without high ATM charges.

Drawbacks to Cash Line of Credit 

The biggest drawback to a cash line of credit is that you will have to pay it back later on like any other kind of credit. Using a line of credit will limit your future disposable income because you’ll have to spend part of your money paying it off.

Since interest of 10% or more will probably be charged on the line of credit the amount you have to pay back will be more than what you used. This could get a customer into a situation where their credit payments could exceed their income.

Another drawback is that a line of credit is limited. If a customer used all the credit available they could find themselves with no credit but facing high payments.

Therefore it is best to use lines of credit sparingly. Only use lines of credit when other alternatives have been exhausted.

Getting a Cash Line of Credit

Most banks and credit unions will offer some sort of cash line of credit to their customers. It maybe called overdraft protection or a credit card. Some banks will offer a credit card that includes overdraft protection. You can learn if you bank offers this service by visiting its website or asking the people at your bank.

Credit unions may offer lower rates and be more willing to work with people with bad credit. Those with bad credit ratings will always have a more difficult time getting a cash line of credit. Some banks will offer a cash line of credit to those with bad credit at a higher interest rate. Internet banks maybe easier to work with, especially for those with bad credit ratings.