On the surface, credit cards and personal lines of credit may seem similar. Both offer flexible access to large amounts of cash with minimal hassle and straightforward payoff terms. However, both have their own advantages and disadvantages. Let’s look at some of the key differences between credit cards and lines of credit.

How Does a Line of Credit Work?
A line of credit is a type of credit account that gives you access to a set amount of cash. Once you’ve been approved for a line of credit, you can withdraw as needed as long as you keep the account in good standing by not exceeding the authorized spending limit and making minimum monthly payments.

How Does a Credit Card Work?
A credit card is a type of credit account that allows you to directly purchase items with credit. Many types of credit cards exist, like secured credit cards and cards that offer rewards or pay cash back.

Should I Use a Credit Card or Line of Credit?
Credit cards are useful for smaller, everyday purchases and can be a great way to build credit. If you already have a good credit score, credit cards can be a great way to earn rewards on purchases you already would have made.

A line of credit is better suited for large, one-time purchases like emergency vehicle maintenance or home renovations. Furthermore, lines of credit are a popular tool for debt consolidation, considering oftentimes they offer lower interest rates than credit cards. If you’re a homeowner, you can leverage the equity in your property to open a home equity line of credit (HELOC).

Credit cards and lines of credit are both tools you can use to have quick, easy access to cash. However, they both have their own unique best use cases, and it’s important to make sure you’re spending responsibly before you open any credit account. Try to pay off your balance every month, and make sure you never miss a payment.

If you’re interested in exploring Ascend’s credit options, head to your nearest branch or give us a call at 800-342-3086. If you’re unsure whether opening a credit account is right for you, check out our free financial education course on using credit responsibly.