Read the fine print - acceptance of Penfed 1.25% credit card...

<<any creditor with which you have a deposit account with can withdraw funds from that deposit account to pay any outstanding debt you owe with that financial institution.>>

True, nothing has changed, but the fine print has brought into focus an option we have not to open a credit card offered by the financial instution where we have our deposit funds. There are too many other credit cards out there to choose from that are not encumbered by cross securitization.

I guess I never looked at it from the fraudulent-use perspective... I always thought of it from a 'bad debtor' point of view and dismissed it as irrelevant.

I would hope that the fact they're a credit union would be an indication that they'd work with you in the event of fraudulent charges.

On an unrelated note, why are they trying to be hip by calling themselves PFCU? Don't they know that their street name is PenFed?

<On an unrelated note, why are they trying to be hip by calling themselves PFCU? Don't they know that their street name is PenFed?>



bssc said:

<<IF I DEFAULT ON ANY CREDIT EXTENDED OR CASH ADVANCED UNDER MY CREDIT CARD ACCOUNT(S).

I would interpret that they would not do this in case of fraud since you are not defaulting.>>

What if the instution is not convinced that it is fraud? Is an affidavit sufficient to establish your innocence? I know I'm being paranoid, but fraudsters are smart people and can probably find a way to make it seem not fraud.

Thanks DYS...nice walk down memory lane! That was the thread I read long ago (and posted apparently), which stirred my fears a few days ago upon reading the fine print.

The extra .25% sure is nice. I already have 15K Penfed 1.25% but who knows when another 15K would come in handy. I haven't thrown away the Authorization form, it's sitting in my "to shred" box, and I'm almost certain my fears are paranoia. Glad to read that SIS also thought it wasn't that great an idea...

SIS said:

but as I stated and soupcxan referred to, if there is a problem with your loan/credit account, they can freeze/use your deposit accounts...what they may consider "default" may actually be a legitimate dispute, and i wouldnt want my money held hostage...as myth465 suggested, having all your eggs in one basket also makes it difficult to switch if they do cause you problems...yet another reason I wouldnt want to have ALL my accounts in one place

Storme said: okay...?

what is the issue?

any creditor with which you have a deposit account with can withdraw funds from that deposit account to pay any outstanding debt you owe with that financial institution.


talk about paranoid.

Federal Reserve Regulation Z:

(d) Offsets by card issuer prohibited.
(1) A card issuer may not take any action, either before or after termination of credit card privileges, to offset a cardholder's indebtedness arising from a consumer credit transaction under the relevant credit card plan against funds of the cardholder held on deposit with the card issuer.
(2) This paragraph does not alter or affect the right of a card issuer acting under state or Federal law to do any of the following with regard to funds of a cardholder held on deposit with the card issuer if the same procedure is constitutionally available to creditors generally: obtain or enforce a consensual security interest in the funds; attach or otherwise levy upon the funds; or obtain or enforce a court order relating to the funds.
(3) This paragraph does not prohibit a plan, if authorized in writing by the cardholder, under which the card issuer may periodically deduct all or part of the cardholder's credit card debt from a deposit account held with the card issuer (subject to the limitations in Sec. 226.13(d)(1)).


US Code Title 15 Section 1666h:


(a) Offset against consumer’s funds
A card issuer may not take any action to offset a cardholder’s indebtedness arising in connection with a consumer credit transaction under the relevant credit card plan against funds of the cardholder held on deposit with the card issuer unless—
(1) such action was previously authorized in writing by the cardholder in accordance with a credit plan whereby the cardholder agrees periodically to pay debts incurred in his open end credit account by permitting the card issuer periodically to deduct all or a portion of such debt from the cardholder’s deposit account, and
(2) such action with respect to any outstanding disputed amount not be taken by the card issuer upon request of the cardholder.

The right of set off in regulation Z although similar in application to cross-collaterization is not legally the same thing. A right of set off is that AFTER DEFAULT, gee, because there is money in savings account A, the bank can take it to pay off loan account B in the case of default. Cross collaterilation is that, when you open up loan account B, you at that time, grant a security interest in savings Account A to secure loan B until it is paid off. Also, if you open up auto loan C, you not only grant a security interest in savings account A, but, until account B is paid off, you will not get the lien released on your car if you payoff loan C but are in default on loan B....(each loan is secured by all deposit accounts, and the collateral for one loan also secures the others, even personal loans and credit cards).....


It's a Credit Union thing, you wouldn't understand.......

This is one of the negative things about Credit Unions; they, in practice, have greater powers to make sure you do not cause a loss to the the credit union---including kicking you out if you do cause a loss....Cross-collateralization is something to be looked out for when deciding where to do business.......Better rates and the personal touch when attempting to rebuild credit are two of the many positive things about credit unions.....

rooms222 said: This is one of the negative things about Credit Unions; they, in practice, have greater powers to make sure you do not cause a loss to the the credit union.....

Well, husband received his Penfed cc today without sending in the written authorization...so I guess unless he cancels within 30 days, the fine print still holds (read the fine print again and it seems no signature is even required). I'm wondering if credit unions don't have to follow Regulation Z.

>>>>Well, husband received his Penfed cc today without sending in the written authorization...so I guess unless he cancels within 30 days, the fine print still holds (read the fine print again and it seems no signature is even required). I'm wondering if credit unions don't have to follow Regulation Z.

Guess I was unclear. Credit Unions do follow regulation Z that prohibits "set off." Cross-collateralization is similar, but is not "set-off" so it is allowed. The difference is in the timing of the disclosure and the attachment of the security interest in the collateral....Credit Unions can do cross-collateralization, but not set off.....The practical effect is the same....