What's the Difference Between a Credit Card and a Line of Credit?
LOS ANGELES, April 4, 2022 (Newswire.com) - iQuanti: Credit cards and lines of credit are two of the most popular paths to building credit for future budgeting and expenses. While both are types of revolving credit and come with a set credit limit, there are also some differences between a credit card and an online line of credit. One of the most notable distinctions is that not all lines of credit are connected to a card, but the differences don't end there. Let's dive deeper into some key differences between lines of credit and credit cards so that you can decide which option is right for your needs.
Interest rates
When it comes to interest rates, credit cards typically have higher APRs than lines of credit. While you may see some slight differences between unsecured and secured lines of credit and secured and unsecured credit cards, this rule of thumb is generally true.
Some credit cards carry an introductory grace period on interest that typically isn't standard for lines of credit. This could be enticing to any users who may need the benefit of cash flow without the initial hassle of interest. But keep in mind that this is temporary, and the credit card's APR could end up much higher than line of credit rates anyway.
Credit limits
Credit cards often have lower credit limits to minimize risk. Lines of credit, on the other hand, allow you more flexibility on general credit limits, so you may be able to draw on more funds. If you need a larger amount of money to fund expenses, a line of credit may be the right choice for you.
Approval process
The approval process for credit cards and lines of credit often has some slight variances. Since lines of credit offer more flexibility, some require a better credit score and a stronger debt-to-income ratio than a typical credit card user. Luckily, there are also many line of credit options designed for borrowers with poor and fair credit. If you fall into this category, make sure to search for lenders with more lenient credit score requirements.
Rewards and benefits
One of the biggest strengths of credit cards is their rewards programs. Repeated monthly payments and a well-managed balance can earn you some wonderful benefits and rewards, which will vary depending on what card you chose.
Lines of credit, however, do not offer rewards programs. This might make them less appealing to users who are looking for a credit line they can get rewards from.
The bottom line
Although there is no right choice between credit cards and lines of credit, you can help make your decision based off your financial situation and preferences. If you want to have access to funds with a lower APR, then a line of credit may be the right option. And if you want to receive rewards for your spending, then you should consider getting a credit card. Do some research and weigh your options to choose the right option and get the funds you need fast.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.
Source: iQuanti, Inc.