When it comes to choosing a credit product, we have all been confused faced with the plethora of personal financing options. Personal loan, education loan, home loan, car loan - name your need and you have a loan for it. Apart from loans, another option that can be found in almost every wallet these days is a credit card. Purchase, swipe, and pay - it's as simple as that.
But is it really your best option?
But, have you ever heard of a Credit Line? What is a Credit Line?
A credit line is a never-ending source of funds that can be used for anything and everything. Once you get approved for a credit limit, you have the flexibility of borrowing any amount from that limit - anytime, anywhere.
As you repay the borrowed amount, your credit limit gets replenished and is ready to be used again.
So which is better - a credit card or a credit line? Let's take a look at their pros and cons to get a clearer picture.
Convenience - have this in your pocket, and you don't have to carry cash around everywhere you go.
Serves your everyday needs - online and offline shopping, dining, movies and small payments
Reward points - most of the credit cards offer reward points that can be in the form of cashback, gift cards, airline miles, merchandise, etc.
High interest and fees - the interest charged after the due date is way higher than the traditional loans. Also, bear in mind that not clearing your credit card dues on time will incur additional penalties and charges.
Potential for fraud - as secure as the systems may be, there is always a potential for fraudulent activities. There are a lot of cases in which hackers got hold of card details and misused them.
Risk of overspending - while a credit card may seem like an infinite pool of money, it's crucial that you keep a tab on all your purchases to avoid falling into severe debts.
Affordable interest rates - a credit line is offered at much lower interest rates as compared to a credit card (as low as 13 per cent pa).
No usage, no interest - you have to pay interest only on the amount you borrow from your credit line, not on the entire approved limit.
Flexible & responsible borrowing - you have the flexibility of borrowing the amount you need. Be it small expenses like bill payments, shopping, etc. or big expenses like rent deposit, education, medical emergencies, etc. - money is available for everything.
Convenient repayment - you have the option of paying back in EMIs that work for you. From 2 months to 3 years, choose what suits you.
Credit available for a lifetime - once you repay the amount you borrow from your credit line, the credit limit gets replenished and can be used again and again.
Well, we can hardly think of any that outweigh its advantages.
To sum it up, a Credit Line comes really handy when:
- you need quick access to cash for small and big expenses
- you want to repay the borrowed amount gradually
So the next time you are confused between a credit card and a credit line, you know which one suits your needs the best.
The author is the Co Founder and COO, MoneyTap