Learn About Lines of Credit – How They Work and How They Affect Your Credit Scores

Where Can I Get a Credit Line?

Lines of credit are available from most financial organizations, including banks and credit unions. Customers can get these from some of the leading credit card companies. Remember that you usually need excellent credit to qualify. Online lenders may also have lines of credit available, especially if you’re looking for a line of credit for your business.

Which Is Better: A Line of Credit or a Credit Card? 

If you need to borrow money quickly, a credit card or a line of credit may be the way to go. Here are some advantages and disadvantages of each method of financing.

Ease of use

You can use your credit card to purchase at both physical stores and internet businesses. However, using a line of credit occasionally necessitates extra effort. Some banks will provide you with a debit card to access your credit line effortlessly. On the other hand, other banks may offer you a checkbook to pay others (if they accept checks) or deposit funds from your credit line into your bank account.

If you need cash quickly, a line of credit is the clear winner. Getting money via a line of credit is often less expensive and more accessible than utilizing a credit card cash advance, which we don’t advocate unless necessary.

Rewards

When it comes to earning rewards, credit cards outperform lines of credit. Many incentives, such as cashback and travel privileges, are available with rewards credit cards.Furthermore, suppose you have a no-annual-fee credit card and pay your entire statement debt monthly  to avoid interest. In that case, you can enjoy these benefits for free by utilizing your grace period (as long as you avoid other fees).

Borrowing flexibility

Both credit lines and credit cards allow you to borrow money up to your credit limit. Then, as long as you handle the account effectively and repay at least some of what you’ve borrowed, you’ll be able to use your available credit again.

However, most lines of credit only allow you to access cash for a while. Even if you have a spotless payment history, a line of credit’s “draw period” is typically limited to a few years.

On the other hand, a credit card company will frequently allow you to borrow again and again — possibly for decades. The account should remain open as long as you utilize it appropriately and your credit risk remains constant.