Line of Credit vs. Credit Card

First Republic Bank
July 19, 2022

While living debt-free is an excellent goal, borrowing money can provide the resources to achieve short- and long-term financial goals. Lines of credit and credit cards are among your options.

Most consumers are already familiar with credit cards — they’re available in many varieties that cater to a diverse audience. Lines of credit, while less ubiquitous than credit cards, share many similar features while providing distinct advantages. Here, we'll focus primarily on personal lines of credit, which (like credit cards) deliver unsecured access to revolving credit.

What’s the difference between a personal line of credit and a credit card?

Personal lines of credit are similar to credit cards because they’re both a form of revolving credit. This means you can access the credit as needed, repeatedly, up to a set limit. Still, there are several high-level differences worth noting, including:

  • Personal lines of credit are often used for long-term financing for larger expenses, while credit cards are often more useful for smaller, everyday purchases that are already within your budget.
  • Credit cards are used at the point of purchase. The purchase amount is then added to your balance. With lines of credit, you’re covering expenses using actual cash provided by the lender.
  • Personal lines of credit have finite draw periods (the time frame during which you can withdraw funds from the available credit line) that give way to repayment periods, while credit card accounts typically remain open until you close them.


Personal line of credit

Credit card


Longer-term financing. Most often used for big-ticket consumer goods, K–12 education costs, home repairs, family planning and medical expenses. Can also be used to refinance debt such as student loans and auto loans.

Short-term payment tool for everyday expenses, as well as to finance consumer goods and services such as electronics and vacations.

Average interest rates (APR)

9.30% - 17.55%, Variable (based on Prime Rate)

16.11% (national average)

Typical fees

Varies by bank. May include an annual fee for maintenance, and a fee for paying late.

Varies by issuer. May include an annual fee, and fees for exceeding the limit, paying late, transferring a balance, taking out a cash advance and making foreign transactions.


After withdrawing funds, a minimum monthly payment is due. Payments may be calculated as a percentage of the outstanding balance (interest plus principal) or may be interest only. If a debt remains after the draw period ends, installment payments are calculated.

After charging, the issuer calculates the minimum monthly payment based on the balance and the interest rate.


Qualification depends on credit history, credit score, as well as income and household expenses. Good to excellent credit is usually expected. Applications may be completed online, over the phone or in person. After submitting an application, the bank will review the person’s credit and financial circumstances. If accepted, the funds will be made available in an account, which can take as little as one business day.

Qualification depends on credit history and credit score, as well as income and household expenses. Credit cards are available to people with a wide range of credit ratings. Applications may be completed online, over the phone or by mail. After submitting an application, the issuer will review the person’s credit and financial circumstances. If accepted, the credit card will be sent by mail, and is typically received within five to seven business days.

As you dig deeper into these key differences, it should become clear which product makes the most sense for your situation.

What they’re used for

Whether you’ll benefit more from a personal line of credit or a credit card depends heavily on what you’re planning to pay for.

  • Personal lines of credit: Lines of credit are generally used to provide longer-term financing for larger expenses. These big-ticket expenses can vary, but may include things like new cars, minor home expenses, medical procedures and family planning costs, such as adoption fees. Lines of credit are sometimes used to refinance higher-interest debt (like student loans), too.
  • Credit cards: Credit cards are generally better suited for short-term financing for expenses within your budget, because keeping card balances paid makes it easier to avoid interest charges. Credit cards can be used for nearly any personal expense, but they’re often used for everyday expenses, like gas or groceries. Some cardholders also prefer to use credit cards thanks to perks their cards may provide, like travel rewards.

How to get one

Accessibility is another noteworthy factor if you’re planning to borrow money. Credit cards are typically more accessible than personal lines of credit, but it’s a trade-off since they usually have much lower limits.

  • Personal lines of credit: When you apply for a personal line of credit, the lender will assess your credit history and financial profile. If the line is unsecured, eligibility depends on your financial capacity and creditworthiness. For a secured line of credit, you will offer collateral, such as real estate property or cash held in investment accounts; your financial profile and creditworthiness will still factor into eligibility, but the requirements may be more flexible due to the collateral.
  • Credit cards: You apply directly through the credit card issuer, and approval decisions are typically provided instantly or within a few days. You can also apply for credit cards at banks or credit unions, depending on the institution. Odds of approval depend on your creditworthiness and your debt-to-income ratio (DTI). Some cards are designed specifically for applicants with good credit, while others (like secured cards) are more accessible to those with poorer credit scores. Upon approval, you will have a credit card that comes with a fixed credit line. There is no draw period, so you can keep the account open for as long as you like. You may charge purchases in person, online or over the phone, and often can also withdraw cash at ATMs.

Credit impact of applying

Applying for either a line of credit or a credit card will likely impact your credit score to a degree for up to two years, but how you manage your account is much more important in the long run.

  • Personal lines of credit: If approved for a line of credit, a bank will generally furnish the three major credit reporting bureaus with your account activity, and your credit score will benefit when you keep the line of credit in good standing. Payment history is the weightiest credit-scoring factor, so paying on time is important.
  • Credit cards: Credit cards appear on your credit reports, and your account activity affects your credit score. As long as you send all your payments on time and maintain a low balance relative to your credit limit, your credit score will benefit.

Interest and fees

Both credit cards and personal lines of credit tend to have variable interest rates. And, because they’re revolving credit rather than installment loans, these rates tend to be higher — especially with credit cards. There are exceptions, though. Some lines of credit, like First Republic Bank’s Personal Line of Credit, offer fixed interest rates.

  • Personal lines of credit: Interest rates on personal lines of credit are usually variable, so they can fluctuate with the index (such as the prime lending rate) that they’re tied to. Fees, too, can be associated with the line of credit, depending on the lender. They might include annual maintenance fees, late payment fees and transaction fees. These also vary by lender.
  • Credit cards: Credit cards generally have higher interest rates than other types of debt, and they’re nearly always variable. Each account may have several annual percentage rates (APRs), which is the interest rate — the nominal cost of borrowing the principal — plus any extra costs or fees that the lender may charge. These may include annual fees, foreign transaction fees, late payment fees, balance transfer fees and more.

Is a personal line of credit better than a credit card?

Not all debt is bad; more than ever, it’s wise to plan and ensure that you have access to money for when the time is right.

Credit cards and personal lines of credit are often compared to each other, but it’s crucial to learn the difference between the two types of products, so you can make the right borrowing choice for your financial situation and your goals.

Type of Credit



Personal Line of Credit

  • Offers flexible access to credit
  • Limits are usually high enough for large purchases
  • Interest rates tend to be lower than credit cards
  • Intended use must generally be approved by the lender
  • May require better credit than credit cards
  • Draw period is finite

Credit Card

  • Offers flexible access to credit
  • Available to borrowers in all credit score ranges
  • Grace period allows you to pay off purchases over a few weeks before accruing interest charges
  • May provide rewards and other benefits


  • Credit limits are often lower than lines of credit
  • Interest rates tend to be higher than most other types of credit
  • May involve a variety of fees not associated with lines of credit
Now that you know the difference, evaluate your options and use First Republic’s Personal Line of Credit calculator to see whether a Personal Line of Credit might be a fit for you.
First Republic’s Personal Line of Credit1 – access funds with fixed rates from 6.95% APR (with discounts)2.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document. This information is governed by our Terms and Conditions of use.

Contact your legal, tax and financial advisors for advice on deciding whether this is the right product for you. Terms and conditions apply.

Product is not available in all markets. For a complete list of locations, visit Applicants must meet a First Republic banker to open account. This is not a commitment to lend. Loan approval is subject to a completed application with associated documentation and confirmation that income, liquidity, credit history and other application information meet the minimum requirements for this product. Applicants should discuss line of credit terms, conditions and account details with their banker.

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