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In response to another question (about how to make credit cards pay interest on any positive balance), I came up with an odd combination: Get an account with both a debit card and a linked overdraft-line-of-credit loan. This seems to have an interesting, if odd, mix of characteristics:

  • This would pay interest on positive balances (though minimal, these days).

  • It would probably have a lower loan interest rate than most credit cards (depending on what security you use to guarantee it).

  • It wouldn't have a "grace period", but you could get something resembling that by maintaining a buffer balance.

  • You wouldn't get a credit-card-style detailed monthly statement; the account statement(s) would carry some but not all of that info.

  • As of last time I checked, debit cards still didn't have all the protections of credit cards -- no chargeback mechanism, never mind all the add-ons some cards offer like "extended warranties".

... Assuming a bank was OK with this setup, what other advantages and disadvantages would this have? How close does it really come to being a non-credit-card credit-card? Is it a stupid idea, brilliant, or brilliantly stupid?

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    I think this is kind of silly. Credit cards aren't supposed to have a positive value. Bank accounts aren't supposed to have a negative value. I feel like any combination of the two will not give you the best aspects of either, so why try to combine them? Get the best credit card you can, get the best interest bearing account you can. Am I missing an advantage of combining them? – briantist Jun 13 '15 at 15:50
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    My credit card gives me 2% cash back, and I don't want to owe interest at the rate my bank offers overdraft loans. In fact, I don't want to pay any interest at all. Other than that, it's a good idea. (Just not for me) – JTP - Apologise to Monica Jun 13 '15 at 15:56
  • I fully agree that it's silly; I too am getting a bit back and psy in full every month so i'm not paying interest. I'm just bemused by the concept and wondering how well or poorly it would work. – keshlam Jun 13 '15 at 16:07
  • I think you'd get a higher return by letting the money you would use to pay off the credit card sit in an account earning interest during the grace period between the time of purchase (when the funds are no longer available to you or earning interest) and the credit card bill due date. – Noah Jun 13 '15 at 16:55
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I can't think of a single advantage to this scheme over having an interest-bearing checking account and a traditional credit card. However, there is a big disadvantage that you missed.

Overdraft protection typically comes with a per-transaction fee for every overdrawn transaction. With most banks, this fee is at least $10.

Even if you find a bank that has no overdraft fee, you are left with the fact that you are paying interest from day one and have gained no advantages over a traditional credit card.

  • Valid points. (And yes, "psy" was a typo for "pay"; spillchuck didn't catch it.) – keshlam Jun 13 '15 at 22:39
  • I agree. My bank has no transaction fee on the overdraft, but the maximum I can overdraw is $1,000 (this is as high as they go, it could be less if your credit isn't good). The interest starts right away and the rate is the same for everyone (no chance of getting a lower rate with better credit). – briantist Jun 14 '15 at 0:49

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