This is only true for credit unions, not regular banks. One of the chief differences between the two is that credit unions can take money from your other accounts to pay debts elsewhere in their system. This is because, as a shareholder, your money is considered cross-collaterized.
Banks cannot take money from your other accounts without a court order, so it’s nothing to be concerned about unless you’ve gone through a bankruptcy and a court is giving orders about your finances.
All credit unions, not just PenFed, can do this. Cross-collaterization is standard in the terms and conditions.
Almost all deposit agreements have right of setoff language. Perhaps this is unenforceable without a court order, but unless that’s what you’re claiming, banks can take your money out.
Credit unions, because of their structure, have cross-collateralization (worth googling if you want the details) where they are allowed to take funds from other accounts to pay an overdue or unpaid debt. This would primarily be a problem for someone if they were going into bankruptcy and hadn’t been paying on their credit card or auto loan for some time. The credit union can still take your money from existing accounts.
This is generally not a condition at regular banks. “Traditional banks must obtain a court order before taking funds from your checking or savings accounts to pay a delinquent loan, even if the money is with the same bank.”
The one exception to this at banks is for business loans. “If you have a business credit card or business loan with a bank and money in checking or savings account with that same bank, your money can be seized for failing to pay on the business debt.”
If you search online you will find numerous sites and lawyers detailing this information.
I think they like to see a checking or savings account before they offer you credit, not sure why though… esp because they seemed so eager to open 1000 accounts for anyone who was foolish enough to hand over their ssn a few years ago…
Had no issue with WF recently without any prior relationship. May need to open a checking in the future to structure removal of entire CB due to the way they do increments of CB differently via check and ATM.
Had issues getting into Barclays years ago denying on a CC w/ 0/0 BT, but then no trouble once SM moved to them. Since, obtained NFL, CF, etc. for signup.
[quote]good luck getting much of a credit line from a bank with whom you have no other relationship. [/quote]NOT true in our case; we did not have a banking relationship with them when we applied and got approved for our CCs ten years ago. I’ve been AU on my DH’s account for the longest time until I got my own DiscoverIT last year and my CL was $25,000. I spend up to $20K on it monthly buying GCs and PIF on or before statement cut date.
just recently DH and I opened savings acct with them to avail of the $200 sign up bonus with $20K deposit that we just parked there a few days. I already got my bonus, DH is waiting on his.
i haven’t had a credit card in over 5 years. i was scammed and the banks were of no help. i was ready to default, but my parents felt guilty (over something else) and paid for it ~$20k.
as fate would have it, i don’t need credit anymore. e*trade is my stock broker and bank, the visa debit card they provide is very safe (i’m always getting called to approve charges).
May a bank take money from my deposit account to make a payment on a loan that I owe to the bank?
Usually, yes. Generally, a bank may take money from your deposit account to make a payment on a separate debt that you owe to the bank, such as a car loan, if you are not paying that loan on time. This is called the right of offset.
In some situations, the bank can exercise the right of offset without letting a customer know in advance that it is going to do it.
However, federal law limits what a bank can do in some cases. For example, federal law won’t allow a bank to offset your deposit account to pay off your consumer credit card account.
This is different from cross-collateralization where, for example, if you have a secured auto loan and an unsecured personal loan with the same FI and subject to a cross-collateralization agreement, the FI can repossess the vehicle securing the auto loan if you default on the unsecured loan (even if you don’t default on the auto loan). And as you said, this kind of clause appears to be universal or nearly universal with credit unions, but it doesn’t appear anything stops a bank from including it in their agreements (it’s just uncommon).
As the thread title refers to credit cards, this should be emphasized:: “…federal law won’t allow a bank to offset your deposit account to pay off your consumer credit card account.”
The title of this thread and main complaint of the OP is about credit cards, and that complaint only applies to credit unions.
I do keep cash/assets at credit unions where I have credit cards. If you plan on not paying your credit union credit card bill, you can move your assets to another institution.
I read that article. Maybe it’s something specific to bankruptcy. I don’t know what those other lawyers are referring to either because I don’t know really what to search for. Maybe some states have their own laws. I know California has different rules with regard to FIs. However, I looked quickly and found this statute:
Any bank shall have the right to set off any obligation or claim which it has, when the same is matured against any depositor.
Needing credit and having a credit card (or ten) are not the same things. You might be the only user on this forum without one, and you’re missing out on rewards, purchase protections, travel protections, etc. I always advise against debit cards, because they don’t have the same protections and if someone steals your card they have access to your money, which could trigger lots of problems, even if temporary. But I guess if your card asks to approve every single charge, then it’s safe in those regards.
I don’t need credit either but since it dawned on me that when I pay in cash, all I get are receipts but with CCs, I get rewards for the same purchases w/o doing anything special. And then I learned there are lots of CCs that offer more rewards and I never went back to cash again.
I concur, DCs do not provide any protection although if you report unauthorized purchases made on your card in case it was stolen, you may still get your funds back but I’ve heard from a lot of people I know who experienced it, it took as long as 45 days before they got it. With CCs, IINM, the most you’d be liable for is $50 and most often, you’re not even liable for unauthorized charges if you report it immediately. Those of us who check our accounts regularly, we find it out sooner than later.
We don’t eat donuts but for other things we buy, I use our 3% CB credit card so that’s what we prefer to use unless there’s category bonus of 5% for drugstore purchases, where I’ll use that instead.
it’s the old coupon hustle they used to talk about in college… it makes you spend more, and imo too much effort. save more spend less that’s my system.