Line of Credit vs Credit Card: Which Should You Get?

Both a line of credit and a credit card are forms of revolving credit. This means you can borrow up to an approved limit, repay what you use, and then access credit again. While they may seem similar on the surface, they work in very different ways, and choosing the wrong option can increase costs or make managing repayments more difficult.

The right choice depends on how you plan to use the money, how long you expect to carry a balance, and whether flexibility or convenience is more important to you. This guide explains the difference between a line of credit and a credit card, compares how they are typically used, and helps you decide which option may suit your financial situation.

What is a line of credit?

A line of credit is a revolving credit account with an approved borrowing limit. You can access funds when needed, repay them, and then reuse the available credit.

Unlike a credit card, a line of credit usually does not come with a physical card. Funds are generally accessed through bank transfers, online withdrawals, or linked accounts.

Key features of a line of credit often include borrowing only what you need up to your limit, paying interest only on the outstanding balance, the ability to repay and redraw funds repeatedly, and interest rates that are typically lower than standard credit cards. Most lines of credit have variable interest rates.

Types of lines of credit

Personal line of credit (PLOC)
This is usually unsecured and assessed based on income, credit history, and affordability. Limits vary by lender and borrower, and interest rates are generally variable. These products do not usually offer rewards or interest-free periods.

Home equity line of credit (HELOC)
This type of line of credit is secured against property. Interest rates are often lower due to the security, and limits can be higher. Because the loan is secured, defaulting can put the property at risk.

How a line of credit works

A typical line of credit involves applying and being approved for a limit, drawing funds only when required, making minimum monthly repayments, paying interest only on the amount borrowed, and being able to repay and redraw funds during the agreed draw period.

What is a credit card?

A credit card is a revolving credit product accessed using a physical or digital card. It is commonly used for everyday purchases such as groceries, fuel, bills, and online shopping.

Credit cards are designed for convenience and often include features such as interest-free periods, rewards programs, and fraud protection.

How credit cards work

After applying and being approved for a limit, you make purchases using the card. Each month, you receive a statement. If you pay the balance in full by the due date, you may avoid interest during the interest-free period. If you carry a balance, interest is charged on the outstanding amount.

Types of credit cards

Standard credit cards usually have lower or no annual fees and no rewards.
Rewards credit cards offer points, cashback, or travel benefits but often come with higher interest rates and annual fees.
Low-rate credit cards focus on lower ongoing interest rates and fewer extras, making them more suitable for carrying balances.
Balance transfer cards offer temporary low or zero interest on transferred balances, usually with fees and conditions.

Difference between a line of credit and a credit card

While both products are revolving credit, the differences become clearer when you look at how they are accessed, how interest is charged, and how they are typically used.

A line of credit is accessed via transfers rather than a card, usually has lower interest rates, does not offer interest-free periods or rewards, and is often used for larger balances or ongoing expenses.
A credit card is accessed via a physical or virtual card, often has higher interest rates, may include an interest-free period and rewards, and is commonly used for everyday spending.

When to use a line of credit

A line of credit may be more suitable if you expect to carry a balance or need flexibility.

This can include ongoing or uncertain expenses such as renovations, education costs paid over time, medical treatments, or self-employed business expenses. Some people also use a line of credit as an emergency backup alongside savings, as interest is only charged if funds are used. It may also help manage short-term cash-flow gaps for irregular income, provided there is a clear repayment plan.

A line of credit is sometimes considered for consolidating higher-interest credit card debt, though this approach requires discipline and avoiding further card spending.

When to use a credit card

A credit card is often more suitable for short-term borrowing and everyday purchases, particularly when the balance can be paid in full each month.

It can be useful for regular spending, online shopping, and bills that accept cards. Paying the balance in full can allow you to benefit from interest-free periods. Credit cards may also offer rewards, purchase protection, and fraud safeguards. For some people, credit cards are an accessible way to start building a credit history when managed responsibly.

Can you have both?

Many Australians use both a credit card and a line of credit for different purposes.

A common approach is to use a credit card for everyday spending and pay it off in full each month, while keeping a line of credit available for larger or longer-term expenses where lower interest rates may apply. This strategy requires careful budgeting and ensuring repayments remain affordable.

Credit24 line of credit

Credit24 offers a personal line of credit designed to provide flexible access to funds while supporting responsible borrowing.

Features may include borrowing between $500 and $10,000, paying interest only on the amount used, no application, monthly, or withdrawal fees, flexible repayments of up to 36 months, and access to funds via OSKO for eligible banks.

You can apply when you feel ready by visiting:
Apply now

Frequently asked questions

What’s the main difference between a line of credit and a credit card?
A credit card is designed for purchases and convenience, often with interest-free periods and rewards. A line of credit is designed for flexibility and carrying balances, usually at lower interest rates.

Which typically has lower interest rates?
Lines of credit often have lower ongoing rates than credit cards, but credit cards can be cheaper if the balance is paid in full each month.

Can I use a line of credit like a credit card?
Generally no. Lines of credit are usually accessed via transfers rather than at checkout.

Which is better for building credit history?
Both can support credit history if repayments are made on time and balances are managed responsibly.

Should I pay off a credit card with a line of credit?
This may reduce interest if the rate is lower, but only if new card debt is avoided.

Which usually has higher limits?
Lines of credit often have higher limits, though some premium credit cards may offer comparable limits.

Disclaimer

IPF Digital Australia Pty Ltd, trading as Credit24, ABN 59 130 894 405. Australian Credit Licence 422839.

The information in this article is general in nature and does not consider your objectives, financial situation, or needs. Lending criteria, fees, and charges apply. For product details, eligibility requirements, and full terms and conditions, visit www.credit24.com.au.