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Revolving Credit

Revolving Credit Loans

What is meant by a revolving credit loan?

Revolving credit programs do not have a fixed number of payments. Examples of revolving credit products used by consumers include credit cards, lines-of-credit and home equity lines-of-credit. Typical characteristics of revolving credit products include: * The borrower may use or withdraw funds up to a pre-approved credit limit. * The amount of credit available can increase or decrease as the loan is borrowed and repaid. * Typically, the loan is used repeatedly. * The payments are made on the amount of money borrowed and repaid plus interest owed. * The borrower may repay over time (subject to payment requirements) or in full at any time.

Who needs a revolving credit loan?

Most Americans would have trouble imagining life without a credit card. In fact, the average American has four credit cards with access to approximately $19,000 in credit lines. It is difficult to obtain a hotel room or a rental car without a credit card. For young adults, a credit card is viewed as a rite of passage into the world of credit – buying without the cash on hand. One in three high school seniors carries a credit card, according to a Filene Research Institute report.

Why should credit unions care?

Credit cards are not considered a core product by credit unions and in fact, represent only 5% of a credit union’s loan portfolio. However, credit cards are viewed as a necessary product by almost half of credit unions, in order to retain member loyalty and obtain other deposit and loan business from members. Although the new Credit C.A.R.D. Act will restrict some of the abusive practices of issuers, credit unions for the most part have offered responsible credit products without excessive fees and interest rates.

What can credit unions do?

Credit unions generally view themselves as being in the business of educating members about the wise use of credit. Many are willing to help members with no or blemished credit histories learn to responsibly manage credit, including revolving credit. Youth and low-income Americans are often targets of high-cost credit card programs. Credit unions can offer alternative credit card products and lines-of-credit to these consumers to help them achieve sound financial management.

GECU

El Paso, TX

Family Account MasterCard » View details

GECU’s Family Account MasterCard enables a Primary Borrower to add up to 10 separate dependents as cardholders and each dependent can be assigned a separate spending limit. Parents can give their children a credit card, but monitor their activity. Family members with credit blemishes can be sponsored by a creditworthy family member and be given access to a credit card and rebuild their credit scores.

Linn Area

Cedar Rapids, IA

Plugged In Credit Card » View details

Linn Area Credit Union has been offering teens and young adults between the ages of 16 and 22 a credit card option since 2005 as part of its “Plugged In” package program. Young members can qualify for a credit limit of $500 to $2,000 as long as they have a source of income repayment and no derogatory credit report. Whereas parental approval is necessary if the teen is under 18 years of age, a co-signer is not necessary unless the teen does not have an adequate source of income.

City County CU Of Fort Lauderdale

Ft. Lauderdale, FL

Encore Credit Rebuilder Visa » View details

City County Credit Union of Fort Lauderdale pre-approves members with credit scores between 500 and 599 with at least three positive trades for a credit card with an initial limit of $500. After 12 months of payment history, accounts are reviewed every six months for $250 limit increases up to a maximum of $1,000.
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