A line of credit and a credit card are both revolving credit: you borrow up to a limit, repay, and can borrow again. They’re built for different jobs. A credit card is a way to pay, with an interest-free period on purchases paid in full; a line of credit is a way to borrow, usually at a lower rate but with interest from the day you draw on it. This page compares the two on cost, access, protection and credit reporting. This comparison is part of our credit card basics guides.
At a glance
| Line of credit | Credit card | |
|---|---|---|
| Rate | Usually variable: the lender’s prime rate plus a margin set by your credit | Usually a fixed purchase rate, higher for cash advances |
| Interest-free period | Usually none: interest from the day you draw | A grace period on purchases paid in full by the due date |
| Cash access | Transfers or cheques, usually at the line’s own rate | A cash advance, with a fee and interest from day one |
| Minimum payment | Often interest only, or interest plus a little principal | A set formula; see credit card minimum payments |
| Rewards and protection | Rarely | Many cards: rewards, purchase protection and other coverage |
| Best suited to | Borrowing for a known need | Day-to-day spending paid in full |
Current line of credit rates, by lender and type, are in line of credit rates in Canada.
The cost difference
The gap that matters is between a card’s purchase rate on a carried balance and a line of credit’s rate.
A $5,000 balance carried for a year: at 9% on a line of credit, interest is about $450; at 19.99% on a card, about $1,000. The same money costs roughly $550 less on the line of credit.
The card wins when the balance is paid in full. Card issuers give an interest-free grace period to pay for the previous month's purchases, beginning on the last day of the billing period, and federally regulated financial institutions must provide at least 21 days. It doesn't apply to cash advances, cash-like transactions and balance transfers, and interest applies if the balance isn't paid in full by the due date. A line of credit has no such period, so even a short draw costs interest. How credit card interest works explains the card side in detail.
Taking cash
Drawing cash from a line of credit is usually just a transfer at the line’s normal rate. Taking cash on a credit card is a cash advance: there’s usually a fee each time, the rate is often higher than the purchase rate, and interest starts that day. For cash needs, the line of credit is almost always the cheaper of the two.
Protection
Many credit cards come with coverage that a line of credit doesn’t: purchase protection, extended warranties and, on some cards, travel insurance. Card purchases can also be disputed through the card network; disputing a credit card charge explains chargeback rights. Payments drawn from a line of credit don’t carry those rights.
Credit reporting
Both are reported to the credit bureaus as revolving accounts, both need a hard inquiry to open, and the balance against the limit on each counts toward your credit utilization. Lenders usually ask for a stronger credit profile for an unsecured line of credit than for a basic card; a secured line (such as a home equity line of credit) uses your home as collateral.
When each is the better choice
| Situation | Usually cheaper or better |
|---|---|
| Everyday spending paid in full each month | Credit card: no interest, plus any rewards and protection |
| A planned expense you’ll repay over months | Line of credit, or a personal loan with fixed payments |
| Needing cash | Line of credit |
| A card balance you can’t pay off this month | Moving it to a line of credit cuts the rate; a balance transfer is another option, weighed in the balance transfer calculator |
| Consolidating several card balances | Line of credit or a debt consolidation loan |
Many people hold both: a card for spending, paid in full, and a line of credit that sits unused until there’s a real need to borrow. The risk with a line of credit is treating it as extra money; with interest-only minimums, a balance can stay in place for years. For clearing card balances specifically, see how to get out of credit card debt.
Sources
The figures and rules on this page come from these sources, last checked against them on October 4, 2026. How we check facts.
- Financial Consumer Agency of Canada: How credit cards work