$20K Line of Credit, Use It or Lose It?

I need some more advice this morning, if you’ve got the time to offer your two cents.

Mr. A’s business checking account came with a $20,000 line of credit. We have only used it a couple of times, to move money over when we hadn’t been paid by a customer in a timely manner, and last month when we bought the used Chevy truck for $2000, we drew $1000 out of this account. I’ve made one minimum payment so far on that. It has an interest rate of 10.25%.

With my two credit cards being closed recently for non-use, I am starting to feel a little paranoid. I am wondering if I should just leave that $1000 pulled from the line of credit and consider the interest as money well spent to keep the account active. I mean, I know they have the right to lower it if they wish, but I do like the idea of having the cash readily available to our accounts and would hate to lose the option of having it. Should I try to use it for something but pay before interest hits? It almost seems easier to just take the hit for interest and make minimum payments. Agh. All other credit cards are at 0%, except for one that we try to pay off monthly.

What say you?

Thank you in advance!

Yours Truly,

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8 thoughts on “$20K Line of Credit, Use It or Lose It?

  1. that’s a rough one. I think I’d be inclined to take my chances. Perhaps increase the emergency fund a bit so that I wouldn’t have to go back to the credit cards once they get paid off… I know that I will be far less affected by my credit score once we get a house, and I don’t think I’ll be all that inclined towards keeping my credit card accounts open.

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  3. I have been in business for the last 28 years. The first 20 was the hardest. I always paid my bills first, and me last. At times I was 500k in credit card debt. For the last 8 years I have been business credit card debt free. Since I am considering closing my business at this time I just closed 21 credit cards with an un-secured value of 630k all with a zero balance.
    My advice would be to go totaly cash only.Have a good emergency fund.
    What could you have sold to raise the $2000.00 for the truck? Would the seller have taken payments? Always look for options. Trades or barter?
    Good luck with the business-it wil be worth it.

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  4. Do you want to pay $102.50 a year to keep the line of credit? I understand your paranoia after your credit cards were canceled due to non-use. (At least they weren't canceled because they were maxed out! LOL)

    We've had an inactive line of credit for 10 years now. Never used it, but will admit that it's nice to know it's there.

    I would suggest just getting a credit card and every couple of months put a small charge on it and pay it off when the bill comes. Just to keep it active. That right there will save you $102 a year.

    Keep building an emergency savings. Once you have a nice amount saved, check to see what your bank has available in the form of a money market. Ours is fee free, limited amount of withdrawals a month, and requires a minimum balance. It earns much more than our savings account. We leave that money sit there in case of a true emergency.

    You know a lot more than I do about credit scores. Maybe my advice would not work for your circumstance. I don't know.

    Maybe the lower interest rate of the line of credit versus a credit card is causing the dilemma. I wonder if it'd be best to talk to the bank and ask if they cancel line of credit (LOC) accounts due to inactivity. Maybe just draw a small amount out once a year, and put it back in the following month.

    I agree I wouldn't want to be without some type of credit in case of a big emergency. (Family death or some type of accident in the family.) Know what I mean?

    At the very least, I would pay off $750 of the loan so you aren't paying so much interest a year.

    To me, paying $102 a year to hold an account open (& basically not in use) is not money well spent. But everyone's circumstances are different.

    I enjoy your blog and every time I see an email come saying you've written something, I pop in. I'm all about saving money for future needs, saving on current expenses and getting our mortgage paid off (only 3.5 years to go!).

    We've been debt free for 15 years with the exception of our Mortgage which we are paying extra on every month.

    People have to save for those inevitable expenses. It's only a matter of time before the hot water tank goes out. The roof we need to be replaced in X amount of years. The fridge will stop working one of these days. Saving for these emergencies ahead of time not only earns you interest, but saves you from paying interest. (Debt and paying interest are bad words. LOL)

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  5. Because the line of credit is tied to your checking account, I doubt that you will lose the line of credit due to non-use. Talk to your banker and ask them though.

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  6. @GoliathDebtor, thanks for the feedback.

    @Anonymous, great advice. Cash is definitely the best way to go. I would have opted to do things differently, but my husband is more of a risk taker than I am. He has good intuition on these things, so I have to go with his ideas sometimes.

    @Elif – thanks I’ll check with my bank.

    K Cleaver, thank you for visiting and I’m so happy to hear that you come back to read my blog again and again! Good advice in your comment, thank you!

    Thank you all for visiting and commenting!

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