Credit Unions Can Seize Funds to Cover Credit Card Defaults

Here’s an interesting little tidbit from Consumer Reports Money Advisor… Almost all credit unions require you to put up your other accounts as collateral when applying for one of their credit cards. Thus, if you default on the card, they can take your savings and apply it toward what you owe them. In contrast, very few banks require this sort of collateral when opening a credit card account.

Hopefully this won’t directly impact you, but it’s certainly worth knowing about.

7 Responses to “Credit Unions Can Seize Funds to Cover Credit Card Defaults”

  1. Anonymous

    This reminds me of when I worked as a bank teller in college. We had a lot of people who would have credit cards and loans default or run checking accounts so negative we closed them down and eventually charged them off. Anyway, a lot of these same people who owed the bank money on charge-offs would still come in to cash checks, so the bank actually instructed us to apply the funds from the check presented to the bad debt rather than giving it to the customer. And to answer the question some are wondering, this was a fairly large regional bank and not a little one branch shop.

    Looking back on it this seems really jerky, but the point is to not think you can continue using the other services of a bank or credit union if you owe them money without the risk of some adverse action.

  2. Anonymous

    Still, my local CU (I belong to two) have current VISA rates between 5.99 and 7.99 %. And they report to the credit bureaus as standard credit cards, not secured credit cards.

  3. Anonymous

    Hubby and I are debating about wether or not to take the $7500 from the government for being first time home owners. In 2 years we will have to start paying “them” back $500 for the next 15 years. If we were to sell our house in that time and do not make a profit the debt would be forgiven. I’m not sure I want to owe anyone anything, hubby thinks it’s basically an interest free loan that can be used to finally get us debt free. What’s your take on this?

    Thanks!

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