My wife and I do our local brick and mortar banking through Bank of America. Before our move, we had a checking account as well as a home equity line of credit (HELOC) at US Bank. We originally used the equity line as a second mortgage. Although we killed that off in short order, we opted to leave the equity line open as it was linked to our checking account, and therefore provided overdraft protection.

While we didn’t actually need a HELOC to support our home purchae this time around, we keep our the balance in our checking account quite low such that we can stash the majority of our money in an online bank account with a much higher rate of return (currently HSBC Direct, though we have accounts with Emigrant Direct and ING Direct, as well). Thus, we run an increased risk of slipping up in our record keeping and inadvertently bouncing a check (yes, we’ve done this before)…

With that in mind, we decided that we’d go ahead and open a new home equity line of credit and once again tie it to our checking account. Sure, we could link a Bank of America savings account to our checking account for overdraft protection, but the interest rate on their savings account isn’t that much better than that of a free checking account, so we’d be leaving money on the table by funding it with money from our online savings account.

All in all, the application process was very painless. We answered a few questions and were out of there within about 20 minutes. Later in the week we received a call from their underwriter asking us for a copy of our settlement statement, and that’s the last we heard. While it’s still not a done deal, we have stellar credit, and we know that we’ve been approved — they’re just doing their due diligence with respect to the property.

In terms of cost, there were no fees associated with establishing this HELOC, and we’re free to close it whenever we want with no penalites. The rate is prime + 0%, and we won’t have to pay a penny unless we carry a balance. Of course, if we do end up carrying a balance, the bit of interest that we’ll pay will be well worth it, as it’ll have saved us from one or more bounced checks.