Quick Comparison
At a Glance
| Feature |
Line of Credit |
Credit Card |
| Typical rate |
7-15% |
19-22%+ |
| Rewards |
No |
Yes |
| Cash access |
Easy, low fee |
High fee |
| Purchase protection |
No |
Yes |
| Credit building |
Yes |
Yes |
| Best for |
Borrowing |
Spending |
Line of Credit Explained
What It Is
| Feature |
Details |
| Type |
Revolving credit |
| Access |
Cheques, transfers, sometimes card |
| Interest |
Variable (Prime + X%) |
| Payment |
Minimum interest + principal |
| Reusable |
Yes |
Types of Lines of Credit
| Type |
Rate |
Requirement |
| Personal LOC |
Prime + 3-7% |
Good credit |
| HELOC |
Prime + 0.5-2% |
Home equity |
| Secured LOC |
Lower |
Collateral |
Typical Rates
| Credit Score |
LOC Rate |
| Excellent (760+) |
Prime + 1-3% |
| Good (700-759) |
Prime + 3-5% |
| Fair (650-699) |
Prime + 5-8% or denied |
Credit Card Explained
What It Is
| Feature |
Details |
| Type |
Revolving credit |
| Access |
Card, online payments |
| Interest |
Fixed (19-22%+) |
| Payment |
Minimum ~2-3% of balance |
| Rewards |
Yes (cash back, points) |
Interest Examples
| Card Type |
Rate |
| Standard |
19.99% |
| Premium rewards |
20.99-22.99% |
| Low rate |
8.99-12.99% |
| Store cards |
25-30% |
Interest Rate Comparison
Same $5,000 Balance
| Product |
Rate |
Monthly Interest |
| Line of credit |
9% |
$37.50 |
| Low-rate credit card |
12% |
$50 |
| Regular credit card |
20% |
$83 |
| Store credit card |
28% |
$117 |
Savings with LOC: $45-80/month on $5,000 balance.
Over One Year
| Product |
Rate |
Interest on $5,000 |
| Line of credit |
9% |
~$450 |
| Credit card |
20% |
~$1,000 |
| Difference |
|
~$550 |
When to Use Each
Use a Line of Credit For
| Situation |
Why |
| Large purchases |
Lower rate |
| Renovations |
Flexible access |
| Emergency fund backup |
Low cost if needed |
| Debt consolidation |
Pay off high-rate cards |
| Planned borrowing |
Known need |
Use a Credit Card For
| Situation |
Why |
| Everyday spending |
Earn rewards |
| Online purchases |
Protection, easy |
| Travel |
Insurance, rewards |
| Building credit |
Reports to bureau |
| Short-term (pay in full) |
Grace period, no interest |
Features Comparison
Payment Features
| Feature |
Line of Credit |
Credit Card |
| Grace period |
Usually no |
Yes (21+ days) |
| Minimum payment |
Interest + some principal |
~2-3% of balance |
| Interest calculation |
Daily |
Daily |
| Pay in full benefit |
Save interest |
No interest |
Access Features
| Feature |
Line of Credit |
Credit Card |
| Cash withdrawals |
Easy, low/no fee |
High fee (3%+) + cash rate |
| Cheque writing |
Yes |
No |
| Bill payments |
Yes |
Yes |
| Point of sale |
Some cards |
Yes |
Protection Features
| Feature |
Line of Credit |
Credit Card |
| Purchase protection |
No |
Yes |
| Extended warranty |
No |
Yes |
| Travel insurance |
No |
Some cards |
| Fraud protection |
Yes |
Yes |
| Chargeback rights |
No |
Yes |
Credit Impact
Both Affect Credit Score
| Factor |
Line of Credit |
Credit Card |
| Hard inquiry to open |
Yes |
Yes |
| Utilization reported |
Yes |
Yes |
| Payment history |
Yes |
Yes |
| Credit mix |
Installment-like |
Revolving |
Utilization Matters
| Utilization |
Impact |
| Under 30% |
Good |
| Over 30% |
Hurts score |
| Over 75% |
Significant hurt |
Having Both
Optimal Strategy
| Product |
Use For |
| Credit card |
All everyday spending |
| Pay in full |
Each month |
| Line of credit |
When borrowing needed |
| Avoid |
Card balance carrying |
Example Setup
| Account |
Purpose |
Balance |
| Cash back credit card |
All purchases |
Pay in full monthly |
| Personal LOC |
Emergency/large purchase |
Rarely used |
Fees Comparison
Common Fees
| Fee Type |
Line of Credit |
Credit Card |
| Annual fee |
Usually $0 |
$0-$150+ |
| Interest |
Lower |
Higher |
| Cash advance |
Often $0 |
3%+ plus higher rate |
| Over-limit |
N/A |
~$29 |
| Late payment |
Varies |
~$29 |
Qualifying Requirements
Line of Credit
| Requirement |
Typical |
| Credit score |
650+ (680+ for best rates) |
| Income |
Steady employment |
| Debt ratio |
Under 40% |
Credit Card
| Requirement |
Typical |
| Credit score |
600+ (varies by card) |
| Income |
Varies |
| Easier to get |
Yes, especially basic cards |
Common Mistakes
Line of Credit Mistakes
| Mistake |
Problem |
| Using for daily spending |
No rewards, habit-forming |
| Interest-only payments |
Never pay off |
| Viewing as “extra money” |
It’s debt |
Credit Card Mistakes
| Mistake |
Problem |
| Carrying balance |
High interest |
| Cash advances |
Very expensive |
| Minimum payments only |
Takes decades to pay |
Decision Framework
Choose LOC If
| Situation |
LOC Wins |
| Need to borrow |
Lower rate |
| Large planned expense |
Flexible access |
| Consolidating debt |
One payment, lower rate |
| Have good credit |
Best rates available |
Choose Credit Card If
| Situation |
Card Wins |
| Paying in full monthly |
Rewards + no interest |
| Everyday purchases |
Convenient, rewards |
| Building credit |
Widely available |
| Want protections |
Purchase, travel |
Best of Both Strategy
| Balance |
Approach |
| Must borrow |
Use line of credit |
| Daily spending |
Credit card (pay in full) |
| Can’t pay in full |
Transfer to LOC |