Credit Cards vs Credit Line Cards
Credit cards have been available in the market for quite some time. But credit line cards are also gaining popularity in recent times, given their upgraded features. Read on to know more about the difference between the two cards.
What is a Credit Card?
Credit cards are issued by banks and enable you to make transactions up to a certain credit limit. You will be charged on a monthly basis a certain interest for the amount you have used. And you are required to pay that charged amount to the bank within a certain time frame to avoid becoming a defaulter.
What is a Credit Line Card?
A credit line card is similar to an unsecured loan. This type of card allows you to borrow a small amount of money on a revolving basis without actually requiring you to apply for a loan. Moreover, you only need to pay interest on the capital utilised instead of the entire credit available. You can repay the amount of money borrowed in EMIs and once the whole amount is repaid, the entire credit line once again becomes available for use.
Difference Between Credit Cards and Credit Line Cards:
Parameter | Credit Line Card | Credit Card |
Fees and charges | No joining fee and annual fee in most cases | Joining fee and annual fee is applicable in most cases |
Usage | Card can be used immediately once you get approval even if you don’t have a physical card | You need to wait till the card is physically delivered, which in most cases takes five to seven working days |
Cash withdrawal | Allows up to 100% cash withdrawal of the available credit limit | You cannot withdraw 100% of the available credit limit |
Top-up loan | There is an option for a top-up loan with credit line card | There is no option for a top-up loan with credit card |
Interest rates | Offers customized interest rates on the amount borrowed | The rate of interest charged on the amount borrowed is fixed |
Advantages and Disadvantages of Credit Cards and Credit Line Cards:
The advantages and disadvantages of credit cards and credit line cards are as follows:
Type | Advantages | Disadvantages |
Credit Line Cards | You can choose how much amount you wish to borrow | You need to pay for the maintenance charges irrespective of whether you use or not use this card. |
This card is ideal for short-term expenses | The variable rate on the line of credit increases if the interest rates rise | |
You can withdraw up to 100% of your credit limit | There are high chances of you spending more due to easy access to funds | |
There are flexible repayment options for borrowed funds | In most cases, interest rates on the funds borrowed are higher than that of the fixed-rate loans | |
Credit Cards | Maximum number of credit cards offer the zero-interest payment tenure of 30 to 50 days | Maximum number of credit cards charge huge fee on cash withdrawals |
You get incentives on completing payments and purchases using a credit card | A high rate of interest is charged if you fail to pay your credit card dues on time |
FAQs on Credit Card vs Credit Line Card
- Will multiple lines or credit in a short period of time affect my credit score?
Yes, applying for multiple credit lines may affect your credit score negatively and hence, it is not advisable.
- Will I be charged a fee if I withdraw money using my credit card?
Yes, you will be charged a fee for withdrawing cash using a credit card.
- Can a line of credit be called a loan?
Yes, a line of credit is a flexible type of loan. It gives the user access to a defined sum of money which can be repaid over time.
- Are there any consequences of not using line of credit?
No, there are no consequences for not using the line of credit. Instead, it may help you boost your credit score as your credit utilization ratio is low.
- What does ‘Credit withdrawal limit’ mean in credit cards?
The ‘Credit withdrawal limit’ denotes the maximum amount of cash you can withdraw on your credit card.
- How much credit score do I need to apply for a credit line card?
You need a good credit score to apply for a credit card. A credit score of 700 and above along with a good debt repayment history is preferred.
- Is it possible to transfer line of credit to credit card?
Yes, it is possible to transfer line of credit to credit card.
- Can I pay my bills using a line of credit?
Yes, you can pay your bills using a line of credit. It will be treated same as cash advance.
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