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Credit card vs. line of credit.

A credit card and a personal line of credit are both types of revolving credit that allow you to borrow up to a certain amount. Once you’ve paid down even a portion of your balance, you’re able to borrow more money again, up to your established credit limit.

Before applying for a credit card or a line of credit, familiarize yourself with a few key differences.

What’s it best for?

Credit card

  • Regular monthly expenses, like recurring payments and purchases you’ll pay off in the short-term.

Line of credit

  • Larger expenses, like home renovations or education, that you’ll pay off over a longer period of time.


How much can I borrow?

Credit card

  • You can borrow up to an agreed upon limit. Depending on factors like your credit history and how high your annual fee is, your credit limit can range from a few hundred dollars, for those who are rebuilding or new to credit, to the mid-five figures for luxury credit cards that come with a lot of perks.

Line of credit

  • You can often borrow more than with a credit card. Limits for a line of credit typically start at $5,000 and can reach into the six figures. Like a credit card, you may borrow only as much as you need at any time.


When am I charged interest?

Credit card

  • When a purchase appears on your monthly statement for the first time, you won’t be charged interest if you pay it off before your payment due date. But after that grace period, you’ll be charged monthly interest on anything left unpaid.

    If you’re a Capital One customer, you can double check your due date on the app or online and set up alerts to let you know when your payment’s due.

    For a cash advance, interest will likely be charged right away and at a higher rate.

Line of credit

  • Though the interest rate may be lower, you’ll be charged interest every day from the time of purchase.

    The interest rate is usually variable, so it may go up and down over time. If you don’t like the sounds of that, lines of credit with fixed interest rates are also available.


How quickly will I need to repay my credit?

Credit card

  • To avoid paying interest, you’ll need to pay off your balance every month before the due date.

    If you can’t pay off the full balance, try to make at least your minimum monthly payments. These are calculated based on a percentage of your credit card debt, and will help you avoid penalties like late fees.

    You’ll still pay interest on any balance that’s left over after your monthly due date, but you’ll be better off than if you hadn’t made any payments at all.

Line of credit

  • You’ll make minimum monthly payments, which are usually equal to the interest.


How does it impact my credit score?

Credit card

  • Applying for a credit card will impact your credit score, but using it responsibly over time can also help you build it. To avoid impacting your credit score, Quick Check® can show you which Capital One credit cards you’ll be approved* for before you apply.

Line of credit

  • Opening a line of credit can impact your credit score, but using it responsibly by making payments on time can also help you build it.


How do I access my funds?

Credit card

  • Credit cards are widely accepted and are especially useful when you want to shop online, rent a car or provide a security deposit. They can also come with benefits, such as insurance or rewards. Be sure to check the terms before you apply.

Line of credit

  • You can access your money by writing a cheque, making a withdrawal from an ATM or using telephone or online banking to pay a bill or transfer money to another account.


What are the fees?

Credit card

Line of credit

  • A financial institution could charge you fees such as a registration fee to start or an annual administration fee. You could also be charged a withdrawal fee, a.k.a. a draw fee, to take money out.


Now that you know a little more about how credit cards and lines of credit work, you might find that one of these options is better suited to your financial situation over another. Or you might need both for different reasons. No matter which you choose, the best move is always to make your payments on time, which can help build your credit score.

Want to learn about other credit options? Check out how credit cards compare to debit cards, payday loans and prepaid cards.


* If Quick Check pre-approves a card, you can be 100% sure we’ll approve your application as long as:

a. There’s been no change in your credit file information, personal information or financial status from the time you receive your Quick Check results to the time you apply for one of our credit cards;

b. You’re at least the age of majority in the province or territory you live in;

c. Your application isn’t flagged for fraud prevention;

d. You don’t have an existing Capital One account; and

e. You haven’t applied for a Capital One account in the last 30 days or had an account with us that was not in good standing in the last year. In good standing means not past due, over limit, fraudulent, restricted, or part of a consumer credit counselling program or bankruptcy.

In some cases, we may not be able to open an account for you even though your application was approved. This can happen if we’re unable to verify your identity, or you don’t provide the required security funds if you’re approved for a Secured Mastercard®.