Some credit cards let you earn rewards on your purchases, like points, miles or cash back.
How is a personal line of credit and a credit card similar?
Revolving debt: Credit cards and personal lines of credit are types of revolving debt. Revolving debt is different from installment debt, such as a personal loan, where you’re given a lump sum that you pay back in fixed monthly installments. With revolving debt, you have access to a credit limit that you can use as needed. As you repay your balance, your credit limit is replenished.
Unsecured: Both credit cards and personal lines of credit are typically unsecured, which means you don’t have to use an asset like a house or car as collateral.
Build your credit history: If you make consistent payments and keep your credit utilization low, both a credit card and a personal line of credit can be a way to build credit.
How is a personal line of credit and a credit card different?
How you access your funds: How you access funds from a personal line of credit can vary. You might be able to write checks, transfer funds to a different account or use a linked debit card to make a purchase. With a credit card, you can typically swipe, insert, tap or use your digital wallet at points of sale.
How interest is accrued: If you carry an outstanding balance on your credit card or personal line of credit, you can be charged interest. However, credit cards often have a grace period on purchases. A grace period is the amount of time between the end of a billing cycle and the payment due date in which you are not charged interest on your purchases if you pay your credit card statement balance in full by the due date each month. If you do not pay the full statement balance by the due date each month, you may lose the grace period and instead be charged interest on your purchases from the date they’re posted to your account. Other transactions on the credit card, like balance transfers and cash advances, typically do not have a grace period and interest may begin accruing on the date of these transactions. Personal lines of credit don’t have grace periods, so interest begins to accrue as soon as you use funds.
Interest rates: Personal lines of credit can have lower interest rates than credit cards.
Length of time open: You can typically use your personal line of credit until the draw period ends. You can use your credit card for as long as the account remains open.
Potential to earn rewards: Credit cards may have rewards programs that allow cardholders to earn cash back, points or miles on purchases. Personal lines of credit typically do not offer rewards.
How does a personal line of credit and a credit card affect credit?
When you apply for a personal line of credit or a credit card, the lender may perform a hard credit inquiry. Hard credit inquiries can decrease your credit score by a few points for up to a year and stay on your credit report for up to 2 years.
Your activity for personal lines of credit and credit cards is typically reported to the credit bureaus. Managing credit responsibly by making payments on time and keeping your credit utilization low can help improve your creditworthiness over time. On the other hand, if you miss payments or use a large portion of your credit limit, it can negatively impact your creditworthiness.
Choosing between a personal line of credit or a credit card
The right choice will come down to your financial circumstances.
Both personal lines of credit and credit cards can be flexible ways to borrow what you need. Personal lines of credit can be better if you only need access to a credit limit for a set period. In general, a personal line of credit can be useful for financing large purchases with a set end date like home repairs while credit cards can be a better option for everyday expenses like groceries and gas.
Citi offers personal loans to both existing Citi customers and new Citi customers that meet specific eligibility criteria, including an established credit and income history along with additional factors determined by Citi. If you think you could benefit from a Citi Personal Loan, apply online today.
This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
