Wells Fargo Closes Personal Lines of Credit for Customers

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Wells Fargo confirmed Thursday that it will close personal lines of credit to focus on credit cards and personal loan products.

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Wells Fargo is closing all existing personal lines of credit, the bank confirmed Thursday, in what it said was an effort to focus on other loan products that meet customers’ borrowing needs.

Account closings don’t mean customers are running out of credit options. Here’s a breakdown:

What is the difference between credit cards and a personal line of credit?

There is a slight difference between personal loans and credit cards – the products that Wells Fargo says it will change direction on – and a personal line of credit, said Teresa Murray, director of the credit monitoring bureau. consumers at the US Public Interest Research Group.

With a personal loan, she said, borrowers receive the principal amount and repay it in regular increments with a fixed interest rate over a set payment period.

A personal line of credit, she said, is more flexible and has a variable interest rate. Consumers pay interest only on the current balance and can borrow as much as they need up to the limit, as long as they make minimum payments.

“Think of it like a swimming pool: you get out of the water, you put water in it. It’s fluid.†Murray said.

Personal lines of credit often have interest rates similar to those on many credit cards, Murray said. “Basically (a personal line of credit) is just a sexier way of talking about a credit card.”

Why is Wells Fargo closing lines of credit?

In a statement to the Observer, the bank said it made the decision to close personal lines of credit last year as it sought to simplify its product offerings.

“We realize the change can be awkward, especially when customer credit can be affected,†Wells Fargo said in the release, adding that it is committed to helping the customer find other credit options.

Account holders have been given 60 days’ notice of the closings, according to letters obtained by CNBC. In the six-page letter, the network reported, the bank also informed customers that the change could affect their credit scores.

This drew criticism from Senator Elizabeth Warren, D-Mass., who took to Twitter: “Not a single customer @WellsFargo should see their credit rating suffer just because their bank is restructuring after years of scams and incompetence, â€she wrote. “Sending a warning just isn’t enough – Wells Fargo needs to fix it. “

Murray said there could be an additional reason why the bank, which has come under regulatory scrutiny since its fake accounts scandal in 2016, is seeking to remove the offer. Lines of credit can take a heavy toll on a bank’s balance sheet.

“On the books, Wells’ exposure would be the full amount of a line of credit,†she said, regardless of how much credit her clients actually borrowed.

Will the change have an impact on my credit rating?

Wells Fargo customers affected by the change can expect a slight impact on their credit rating, Murray said.

“Every time an account is closed … usually it’s going to hurt your credit score, if only by a few points,” she said.

Closures impact a consumer’s credit rating by removing unused credit and increasing their ratio of available credit to used credit.

Remaining balances on Wells Fargo personal line of credit accounts will require minimum payments at a fixed rate, the bank told CNBC.

For those concerned about the impact of account closings on their credit score, Murray cautioned against asking for lines of credit from other banks, which could lower your rating even further. Instead, she said, focus on paying off the current debt.

Where can I apply for a personal line of credit?

Murray recommended that you assess your borrowing needs before opening a personal line of credit. Just like with loans and credit cards, she said, consumers should avoid unnecessary borrowing or taking on debt they can’t pay off.

But if you’re looking to apply for a line of credit, your best bet is a bank you currently have a relationship with, she said, whether through a deposit account or a loan.

Most banks allow customers to apply for a personal line of credit online.

Here are a few banks that offer personal lines of credit or similar products in Charlotte:

  • PNC Bank offers a personal line of credit of $ 1,000 to $ 25,000 with a variable interest rate based on the Wall Street Journal prime rate.

  • Banque Régions has three main personal lines of credit: the Regions Line of Credit, which does not require any collateral and has a fixed interest rate, the Regions Preferred Line of Credit, which offers higher credit limits and requires no collateral and the Regions Secure Savings Line of Credit. Credit., Guaranteed by a savings or money market account.

  • SunTrust, now Truist offers “Personal Credit Line Plus,” a four-year revolving line of credit of $ 5,000 to $ 250,000 for most customers, according to the SunTrust website. There is also an upper limit line of credit for wealthier customers. SunTrust and BB&T merged to become Truist in 2019 – the two former banks continued to offer independent product lines for some time.

  • Fifth Third Bank offers a secured line of credit backed by a savings, CD or investment account, and an unsecured alternative for clients who meet an asset requirement.

  • Although this is not a traditional personal line of credit, Bank of America offers Balance Assist, a small, short-term loan of up to $ 500 with a fixed fee of $ 5 to help clients manage their short-term liquidity needs and limit excessive overdraft fees.

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Hannah Lang covers banking and finance for The Charlotte Observer. She studied business journalism at the University of North Carolina at Chapel Hill and grew up in the same city as her alma mater.



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