November 29, 2020

Business Line Of Credit Vs Credit Card

One of the essential tools for a business enthusiast is the accessibility of having credit in their lives. For them, investing becomes easier through the readily availability credit, be it through the business line of credit or credit card. This aspect of investing money, lending and borrowing it is not only beneficial for the business enthusiasts but a layman as well.

Typically, there are two ways to have complete access to credit, one is known as a business line of credit, and the other is called a credit card. Both of these methods are pretty popular in today’s world, where many small businesses are opening up at a rapid speed. There are differences of opinions when it comes to using either of these credit methods. Some people may prefer a business line of credit over credit cards and vice versa. Whatever the case may be, some certain features or characteristics stay the same between these two methods.

Creditors and business owners often have the difficulty to choose between the two. For them, it is more like a financial dilemma where they have to decide which method to opt for. Business purchases have been this easier and investors know that pretty well. Besides the similarities between the line of credit and credit cards, there are some differences as well. But first, let’s check out what the terms “business line of credit” and “credit cards” stand for.

The business line of credit:

Usually, a fast capital 360 lines of credit works as a small-business loan for many entrepreneurs who run low on cash. When you compare it with a regular business loan, it happens to provide more flexibility with more convenience for users. With the help of a business lie of credit, people can lend up to $100,000 as there is a particular limit to it. There are certain terms and conditions applied; one of them is the payment of interest. The interest is supposed to be paid on a specific proportion of the money that has been borrowed. Then, the borrower can draw as much credit as they wish, but within the credit limit allotted to them. Mostly, business line of credit is taken when there is a need to manage cash flows, pay for an unforeseen expense, or while buying new inventory.

Credit Card:

Just like a business line of credit, a credit card is used to borrow a certain amount of money from banks. This money is usually for personal as well as commercial use with a fixed grace period to pay back the borrowed money. If the borrowed sum of money is not returned within the average grace period, then interest becomes liable on the due money.

Now that we know what these terms mean, it is time to find out the similarities and differences between the two.

What is similar between the two?

As you may be well-aware by now that both are credit methods specifically utilized for borrowing purpose only. They are similar as they help the borrowers in making business purchases with the easily available credit. The business line of credit and credit cards are convenient to use and can help in making recurring purchases pretty easily. Also, these methods save the borrowers from getting robbed as they do not have to carry a big chunk of cash on hand.

Other than that, a business line of credit and credit card charge a particular amount of interest on the debts that have not been paid yet. Even if there is interest to be paid, the best thing about these two methods is that anyone can easily qualify for it. However, a strong credit score is needed to make that happen.

Now that we have discussed the similarities, it is time to talk about the differences between them.

What is so different between the two?

There is one major difference between these two credit methods, i.e., not every other business line of credit is a revolving one. This means that if someone has availed line of credit, then there are high chances that they might not avail it again. This is why a business line of credit is known as a non-revolving credit offer. It is a one-time credit opportunity which should be utilized smartly, especially to fund an expense which has been due. Another difference is the flexible nature of the business line of credit, where borrowers have the right to negotiate with vendors.

Moreover, there are more fees to pay while availing a line of credit than there is for credit cards. For instance, to continue with the line of credit, there is a subscription fee that has to be paid monthly or annually. Credit cards also have some charges, but it is not difficult to find credit cards that do not have any fees. Additionally, while making a withdrawal, a particular fee will be charged on every single transaction you make with the line of credit.

Another difference is that the business line of credit gives you more leverage to generate more credit than credit cards. The credit limit is high with a line of credit which hardly happens with credit cards. Apart from this, the lenders who offer a business line of credit often expect to receive daily or weekly payments. It is different from credit cards where you have the liberty to payback anytime within the due date. One more thing to note here is that borrowing money on credit card is much easier. Getting your loan approved with a line of credit can be challenging at times. Yet, a bad credit score can make things difficult for you and you might end up using an unsecured credit card.

When is a credit card more feasible to use?

If you need to make a retail purchase, then a credit card is a more convenient option. Also, they have more ubiquity and can be effectively utilized in today’s online market. If you have some pending utility payments or you need to buy something from Amazon, then a credit card is the best option. Also, if you will be punctual with the payments, then there will be no additional interest to pay.

When is the business line of credit more feasible to use?

Credit cards do not give out cash, whereas the line of credit does that. This makes this option more feasible if there is an urgent need for cash on hand. There is no withdrawing fee applicable on cash and no certain limit, which is great to increase the working capital or pay bills. Another advantage is the lower rates of interest than credit cards.

Conclusion

All in all, both credit cards and line of credit have pros and cons. You just need to identify which method works best for you and proceed ahead with it! So if you need to borrow some money, then evaluate these options before it gets too late!