Do a line of credit (LOC) and a credit card seem like apples and oranges to you? No need to worry. This article draws a parallel between these two options, as well as tells you about an exceptional business funding provider so you can make the right choice.
Line of Credit vs. Credit Card: Differences
These 2 financing options mainly differ in the following: with an LOC, you get funds against a revolving credit line instead of a lump sum associated with a loan. As for a credit card, in this case, you purchase products/services and then pay off the debt.
So, an LOC provides funds “on demand.” To obtain it, you can apply to banks or credit unions. If you’re eligible for this option, can use up to a maximum amount for a certain period of time. However, if you aren’t obliged to use cash, go for a credit card.
To get approved for both options, you need to tell the lender the purpose you’re applying for the funds, your credit rating, as well as your financial history. Besides, the lending company will also take into account your relationship with it.
What if you get rejected for these financing options? No worries. There are true alternative online lending experts like FirstAmericanMerchant.com. FAM is an award-winning business financing provider and processor specializing in the high-risk field. If you’re weighing your options and don’t know whether to opt for a line of credit, credit card, or another type of financing, turn to FAM.
Differences Between Credit Cards & Credit Lines
Let’s look at several factors that put these 2 funding options apart:
- Credit cards may come with reward programs, which can’t be said about credit lines.
- Credit cards usually charge higher interest rates as compared with, e.g., MCAs, but credit lines charge a fixed interest rate.
- As a rule, credit lines feature lower rates and offer higher credit limits, which isn’t the case with credit cards.
- Credit lines are fine for those having short-term financial needs.
- You can use your credit line card to withdraw cash from ATMs, at POS terminals, as well as make purchases at eCommerce sites.
To wrap things up, credit lines and credit cards are 2 different ways to enjoy access to business funding. Both businesses and individuals can apply for them. However, they come with several differences that you should be aware of.