Is there a hidden downside to using a Personal Line of Credit?

I have a good credit score and don’t normally carry a balance on my credit card, but I had some emergency expenses last month and used the credit card to handle it. I’m looking at the next few months and it will take me 4 months or so to pay it off. The interest rate on my card is 19% because I mostly use it to get points and never carried a balance on it.

I was thinking about applying for a a Personal Line of Credit through my bank to pay off the balance and then save a little on the interest. I would just make the same payments to the bank that I would have put on my credit card. Mostly I think it would make my accounting easier since I like to put monthy expenses on the card to get points and save bank card fees by just paying it all off at once, and I’m a control freak who doesn’t like not being able to ammortize payments down to the penny. I also think it would be handy to have a line of credit in the future in case I ever need a little emergency cash again. I am working on the emergency fund, but right now the majority of my savings are in long term investments and over the next year or so I am basically relying on my credit card for emergencies which, as it turns out, sucks.

Is there a downside to a Personal Line of Credit that I’m not seeing? Looking at the description on line it says there is no fee or application fee and the interest rate is fine, and I don’t see the catch. Does having an open line of credit mess up your credit score? Is there any particular reason not to do it? It seems too good to be true. Assuming you use it responsibly, is there any reason not to use it?

Really it depends how much you put onto the card. Let’s look at three different amounts, and say the unsecured bank credit is at 12%, and you’re going to pay equal installments for four months.

If you’re only talking about $1000, your total repayment by keeping it on the card is only $14.77. Is that worth your time and effort to open up one line of credit to pay off a credit card? Let’s say $500 – you’re still saving only $73.85. How about $10000? You’re saving $147.70. If your emergency was over $10,000, then I’m terribly sorry for whatever happened that you needed those funds so bad! But unless you’re scrimping every penny or the bank will give you an unsecured loan at less than 12%, it doesn’t look like the savings are very appreciable and the work involved is worth more than the savings.

And yeah – I’ve been in situations where $147.70 over four months was something I didn’t care to lose, but I never had a credit card with a $10,000 limit then, either!

Also remember you’re opening a new line of credit that will show up on your credit report. This may help or hinder you; every situation is different.

If you have even halfway decent credit, you ought to be able to get one of those cards with 0% interest for a few months, transfer your balance, and pay it off with no interest. They go up after the initial period, but it sounds like you’ll have it paid off by then anyway. Heck, even if your credit score isn’t good enough for 0 interest, you might be able to get 2.9% or something. I get dozens of these offers in my mailbox every month - I can’t imagine a quick Web search wouldn’t turn something up.

If you have good credit, there is absolutely no reason you should be paying 19%. Call your credit card company and ask them if they can give you a lower rate. Be sure to mention your excellent credit and the fact that all their competitors will be happy to give you a card with a much lower rate.