Alta: How is the Credit Line different from a Credit Card?

While a line of credit and a credit card may seem like the same thing, there are many key differences that separate them.

First, people choose to use them for very different reasons. A credit card is generally used for everyday purchases and spending, while a line of credit is more for big-ticket items and business expenses. Because of this, the limits vary widely for both options.

A line of credit will usually be offered with a higher limit than a normal credit card account, which also means that a line of credit is harder to obtain. 

Credit card issuers tend to set minimum payment requirements at rock-bottom levels. You'll generally owe either a fixed amount — often $25 — or a percentage of the balance, whichever is greater. Some cards require you to pay only 1% or 2% of the balance each month, plus any fees and accrued interest. Making these small payments on time will avoid late fees, but you won't make any real progress on paying down your balance. Basically, paying the minimum amount required will take you years to pay down the amount you own.

To estimate your interest charges, divide your card's annual percentage rate by 12 and multiply it by your average balance. If your card has a 21% APR, for example, your monthly interest rate would be 1.75%, or 21% divided by 12. Multiply that by the balance you're carrying. If you have a balance of, say, $10,000, you'd owe about $175 in interest next month if you paid only the minimum now. 

When your credit card balances climb, so does your credit utilization ratio — the percentage of your credit you’re using. And because your credit utilization ratio is a major factor in your credit score, high balances can badly damage your credit. That makes it harder to qualify for affordable loans and credit cards with the best terms. It can even affect your ability to find a job or rent an apartment, as employers and landlords commonly review applicants' credit. 

Your Line of Credit will be subject to your sales performance and company’s credit history.  We’ll report to credit bureaus your payments on a monthly basis and help you build your business credit score, allowing you to dissociate your personal credit score from your business.

On top of these benefits, we offer you the flexibility to set a payment schedule according to your cash flow needs and no prepayment penalties.

 

Below is a table highlighting some differences between each type of credit

 

Line of Credit

Credit Card

Intended Use

Special big-ticket business expenses (for example inventory purchases).

Everyday consumer & business spending.

Limit

Defined by Sales Performance

Subject to owner’s credit score

Secured by Collateral?

Receivables

Personal Guarantees

Credit Building Impact

Reported monthly to credit bureaus

Reported monthly to credit bureaus

Available Funding

Up to $1M

Personal: $300 - $25K

Business: $1,000 - $50K

Average APR

  • Purchase: 14.99% – 25.00%
  • Cash Advance: Same as Purchase
  • Purchase: 17.18%
  • Cash Advance: 22.07%

0% Introductory APR

No

0% for 6-24 months is common for people with excellent credit.

Annual Fees

NA

Range: $0 - $500

Rewards

NA

Yes, 1% cash back on average

Cash Advance Fee

NA

$13.05

Grace Period

Up to 90 days

20 – 30 days after bill is made available

 

 

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