Line of credit vs. credit card: What’s the difference?

Personal lines of credit and credit cards are two types of revolving credit accounts. But the ways funds are distributed and accessed can differ. Learn more about how personal lines of credit and credit cards compare.

What you’ll learn:

• Personal lines of credit and credit cards are both types of revolving credit with flexible borrowing options.

• Lines of credit offer a set amount of credit that you can borrow and repay as needed within the account’s terms.

• Credit cards offer a line of credit that you can access with a physical card or virtual card number.

• Lines of credit and credit cards may have different interest rates, credit requirements, fees, rewards and more.

Lines of credit, sometimes called credit lines, let you borrow against a credit limit and make repayments as needed within the account’s terms and conditions.

Some lines of credit, such as business lines of credit, have specific uses. Others, like personal lines of credit, tend to be for general purposes. There are also government-backed lines of credit that function in their own ways.

To access a personal line of credit, you might write checks or request a bank transfer. The lender typically charges interest on the outstanding balance and may charge a fee for using the account.

Lines of credit may be secured or unsecured. Secured lines of credit are backed by collateral. Unsecured lines of credit aren’t. A home equity line of credit (HELOC) is an example of a secured line of credit where the home acts as collateral.

Lines of credit may be helpful tools when you need to cover large purchases that don’t have clear-cut costs. That might include things like renovations, medical treatments and weddings.

As with any type of credit, considering how payments and interest fit into your budget could help you decide what’s right. There may be other charges to consider, too. For example, there may be a fee every time you use a personal line of credit.

A credit card is another type of revolving credit available from many banks and credit unions. It’s technically considered a line of credit, offering convenient access to funds through a physical card or virtual card number.

When you apply for a credit card, the credit card issuer reviews your creditworthiness to determine whether to extend a credit line to you. If you’re approved, you can use the card to make purchases. At the end of each billing cycle, you’ll receive a statement that shows your total balance, minimum payment due and transaction history.

Credit cards can be secured or unsecured. Secured credit cards require a cash deposit as collateral.

Credit cards can be a flexible, convenient alternative to cash. You might use one for everyday purchases or to finance large or unexpected purchases. Many credit cards also offer rewards. You can use a credit card to help build credit if you use it responsibly by doing things like paying your statement on time every month.

Lines of credit and credit cards have similar features. But there can be some key differences in how to access credit, interest rates, fees, qualifications and rewards.

With a line of credit, you may be able to access the account using checks and bank transfers. On the other hand, a credit card gives you access to the credit limit simply by swiping, tapping or dipping your card. Virtual cards and other digital options might also be available.

Lines of credit and credit cards typically have different interest rates. And compared to credit cards, you might see lower interest rates on lines of credit.

Both personal lines of credit and credit cards may have annual fees. But you could also be charged a fee each time you use a personal line of credit.

To get a line of credit, you may need to have a checking account with the lending bank or credit union. To get approved for a credit card, you don’t have to have an existing account with the card issuer. For both options, you typically need to prove your creditworthiness.

Rewards programs set credit cards apart from lines of credit. Different types of credit cards may earn cash back, points or miles. You can redeem them for a variety of things and experiences.

Unlike rewards credit cards, personal lines of credit typically don’t offer rewards.

Lines of credit and credit cards both have credit limits, which is the maximum amount you can spend on the account. Credit limits vary based on the borrower’s creditworthiness, among other factors. In some cases, lines of credit may offer higher credit limits than credit cards, but not always.

Here are a few frequently asked questions about lines of credit and credit cards.

If you’re looking for a flexible way to borrow money, a personal line of credit and credit card are two options to consider. No matter which option you choose, make sure you’re applying for the type of credit that’s right for your situation.

Think a credit card might be right for you? You can compare credit cards from Capital One to find the option that works for you. And you can get pre-approved to find out whether you’re eligible for credit cards before you apply. It’s quick and won’t hurt your credit scores.