LINE OF CREDIT vs. CREDIT CARD
If you are in the market for either a
credit or a
credit card, it is important that you understand the differences
between the two. Educating yourself will help you select the option
that is best for your needs. The most important aspects to consider
are payback terms and interest rates.
If you are applying for a credit line or
applying for a credit card you will be required to submit an
application with specific financial info. Your
also be analyzed in detail when determining if approval should be
granted. Different bank and card issuers are going to have different
credit criteria for their products.
Both credit cards and lines of credit can either
be unsecured or secured. Secured credit cards and lines will require
that you utilize some sort of collateral as a deposit (could be
property or cash). Unsecured credit cards and lines of credit do not
require any sort of collateral.
Credit cards and lines of credit both offer revolving credit. This
means that you can withdraw money or make purchases against the
credit limit. Once you repay the amount you have used, the funds
become again accessible.
Even though there are many similarities when
comparing the two, lines of credit and credit cards also have
Credit cards are pieces of plastic with magnetic strips that are
scanned when purchases are made. While a line of credit likely has
paper checks for you to use when you need access to money.
Key differences are obvious when it comes to the advantages each
offer. Since most merchants accept both MasterCard and Visa, users
of credit cards reap the the benefit of not having to bring checks
or cash with them when shopping. The main advantage to a line of
credit is their
rates. They are typically lower than those associated with
Things to take into consideration
Many people use lines of credit instead of credit cards for
their convenience of paying for items over a long period of time.
Credit cards offer a 'grace period' during which users will not be
charged interest. But if you do not pay your balance for that
billing period, a fairly high interest rate will be applied to your
balance. Consumers that know they will be paying for their purchase
over months or years would prefer to pay lower interest rates over a
longer timeframe as opposed to having a 20 day grace period with a
high interest rate to follow.
A line of credit that is secured will likely mean you are using
your home as collateral. Therefore, if you do not pay your note, the
bank will take possession of your home. Therefore, it is important
that you understand how your line is going to work and what is
expected of you prior to signing anything.
Similarly, credit cards have agreements more commonly known as the
disclosure. You will need to read the disclosure carefully so that
you understand how much interest rate you are going to be charged
and what can happen that will equate to you receiving a higher
Pros and Cons of a Line of Credit - Find out if a line of
credit is the best option for your needs.
Secured Loans Guide
What is a Line of Credit?
Line of Credit vs. Lump Sum
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