Personal Line of Credit vs. Credit Card

First Republic Bank
March 8, 2021

While living debt-free is an excellent goal, borrowing money can also be a positive decision. Personal lines of credit and credit cards are among your options. They share a few key qualities, such as the ability to borrow a fixed amount of money on an as-needed basis, but are separate products with unique nuances.

Most consumers are already familiar with credit cards: according to WalletHub’s 2020 research report, 8 in 10 U.S. adults have at least one credit card. Another helpful option is a personal line of credit. Personal lines of credit are less ubiquitous than credit cards, but they do have some distinct advantages.

First Republic’s Personal Line of Credit – access funds with fixed rates from 2.95% APR (with discounts)1.

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

The main difference between personal lines of credit and credit cards is purpose. Personal lines of credit are ideal for large expenses, such as refinancing student loans or minor home upgrades to accommodate a growing family. Personal lines of credit can prevent excessive debt, while offering flexibility and security.

Conversely, credit cards are best for short-term financing. They’re great for covering expenses that are within your monthly budget.


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. Also can 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)


First Republic's Personal Line of Credit offers low fixed rates of 2.95%-4.25% APR, with discounts¹.

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, 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 5 to 7 business days.

Personal line of credit

A personal line of credit is a specific sum that a lender allows you to borrow. The dollar amounts vary by lender — First Republic's Personal Line of Credit offers loan amounts from $65,000 to $350,000. Because it’s a revolving line of credit, you can withdraw any amount up to the limit. Interest accrues only on the borrowed sum, not on the unused portion.

Depending on the lender, there may be restrictions for how you use personal lines of credit. For example, the money may not be spent on business and commercial expenses, or any illegal activities. Savvy reasons to use one for personal planned expenses include:

How do you obtain a personal line of credit?

When you apply for a personal line of credit, the lender will assess your credit history and financial capability. If the line is unsecured, eligibility depends on your 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 capacity and creditworthiness will still factor into eligibility, but the requirements may be more flexible due to the collateral.

Once you’re approved, the lender will offer you a line of credit that is open for a specific period of time, called the draw period.

To access the funds, you may use special checks issued by the lender, a card that functions like a credit card or withdraw cash from a bank branch. A quick and convenient way is to use the lender’s online platform to shift funds from the line of credit into your checking or savings account.

Generally, after using the line, the lender will send you a statement with the minimum payment due, which is based on the amount you borrowed. When you make a principal payment, your account will be credited and you will have more access to the line of credit.

Any balance remaining after the draw period ends will be repaid during a repayment period, with a fixed payment term, in which you will make principal and interest payments.

Lengths of draw periods and terms of repayment may vary across lenders; for example, First Republic’s Personal Line of Credit consists of an initial two-year draw period, during which the borrower makes interest-only payments, followed by a repayment period, during which the borrower makes full principal and interest payments. Note that during the two-year draw period, the borrower does have the option to pay off what they've borrowed (beyond just interest-only payments), if they want access to those funds again, before the repayment period starts.

What interest and fees are associated with a line 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. For this reason, you may want to find a lender that offers fixed rates on personal lines of credit. Because the rate remains constant, you won’t have to worry about rising interest rates impacting your amounts due.

For lenders who offer risk-based pricing, the interest rate you get primarily depends on your credit rating. If your credit scores are good to excellent, the rate will likely be lower.

Fees, too, can be associated with the line of credit, depending on the lender. They may include:

  • An annual maintenance fee that ensures the line of credit is available during the draw period, which is charged on an annual basis or broken up into monthly increments.
  • A late payment fee, if you are delinquent on payments.
  • A transaction fee. Although not common, some banks charge a small fee each time you make a withdrawal.

When shopping around for the best personal line of credit, don’t be afraid to ask the lender about interest rates and fees as you evaluate your options. For example, First Republic’s Personal Line of Credit offers a fixed interest rate and does not have prepayment, origination or maintenance fees.

What is the credit impact of applying for a personal line of credit?

Generally, a bank will furnish the three major credit reporting bureaus with your account activity, and your credit scores 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

Like personal lines of credit, credit cards allow you to make charges up to a given credit limit.

You can use a credit card to pay for any personal expenses, but they’re best for things that are within your budget. For example, you may want to charge groceries, clothes, gas and restaurant meals, then pay it all off at the end of the month.

Charging goods like pricey electronics and appliances can also be sensible, if they fit within your monthly budget. Credit cards offer valuable consumer protection and if you pay off the debt within a few months the interest costs may not be prohibitive. Also if you have a rewards card, you can accumulate points, miles and cash with each purchase. Many also offer compelling perks, such as extra insurance and free checked bags at the airport.

How can you obtain and use a credit card?

You would apply for the account with a credit card issuer. Most accounts are unsecured, so qualification depends on your credit history. If you’re just starting out or are rebuilding damaged credit, you may consider pursuing a secured card, since you would put cash down as collateral that matches the credit limit.

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.

Does a credit card balance renew every month?

On a monthly basis, you will receive an account statement with the amount you owe and the minimum payment due. After making your payment, your credit card balance will be updated. You have the option to send at least the minimum payment or the entire amount due. Minimum payments are based on your balance. If you repay the entire bill by the due date, no financing fees are applied to your debt. If you carry over a balance, interest will be added to the debt and your credit line will readjust with your payment. When you pay the total bill, you will have access to the entire credit line again.

What interest and fees are associated with a credit card?

Interest rates on credit cards are usually variable. On top of that, 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.

Pay close attention to the APR when evaluating your options; under the Federal Truth in Lending Act, all lenders must advertise the APR for consumer loans, so borrowers can make an informed “apples-to-apples” comparison between different products offered by different financial institutions.

Some credit cards may have a very low promotional rate for balance transfers and new accounts, but it may only last a fixed number of months. The regular purchase rate is the APR that’s attached to the things you buy. Many issuers charge higher APRs for cash advances. If you are delinquent on the account, the issuer may raise your rate to a much higher punitive APR.

Credit cards can also come with multiple fees, including:

  • Annual
  • Late payment
  • Balance transfer
  • Cash advance
  • Over-the-limit
  • Foreign transaction

In general, credit card interest rates and fees are higher than those on personal lines of credit, so it’s especially important to keep debt low, if not at zero. For expenses that you do want to finance with a credit card, create a swift and steady payoff plan.

What is the credit impact of applying for a credit card?

Credit cards appear on your credit reports, and your account activity affects your credit scores. As long as you send all your payments on time and maintain a low balance relative to your credit limit, your credit scores will benefit.

Is a 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.

With credit cards, you can pay for a range of affordable short-term expenses, and come out ahead with their consumer protection and rewards programs. To finance expensive planned purchases and reduce the cost of existing debt without hurting your bottom line, a personal line of credit can be a powerful addition to your credit portfolio.

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 Credit – access funds with fixed rates from 2.95% APR (with discounts)1.

1. Annual Percentage Rate. Rates effective as of 05/02/2022 and are subject to change.

If the Account is closed, the rate will increase by 5.00%. Rates shown include relationship-based pricing adjustments of: a) 2.00% for maintaining automatic payments and direct deposit with the Account, b) an additional 0.50% for depositing and maintaining a deposit balance of at least 10% of the approved loan amount into the Account, and c) an additional 0.25% for depositing and maintaining a deposit balance of at least 20% of the approved loan amount into the Account, with the option to deposit up to half of that 20% into an Eagle Invest account.

Banking products and services are provided by First Republic Bank, Member FDIC and Equal Housing Lender

Eagle Invest is an investment advisory service offered by First Republic Investment Management, Inc., and sub-advised by BlackRock FutureAdvisor, Inc. (FutureAdvisor). First Republic Investment Management, FutureAdvisor and Fidelity Investments, Member FINRA/SIPC, are unaffiliated SEC-registered investment advisors. FutureAdvisor is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. $5,000 minimum investment required.

Investment Advisory Services are offered through First Republic Investment Management, an SEC-Registered Investment Advisor and a wholly owned subsidiary of First Republic Bank.