Small Business Credit Cards Versus Lines Of Credit – What Should I Choose?

By | June 19, 2015

A small business credit card looks like an excellent opportunity for small business owners. Basically, it provides direct access to a revolving credit line. Sure, just like any other credit card in the world, it comes with some requirements, specifications and restrictions. It has its own credit limit, whether it comes to cash withdrawals or purchases. At the same time, carrying a balance also implies paying an interest charge, not to mention the grace period.

You can get a credit card from a local bank or you can apply online for it. In the end,  this business credit card is not too different from a consumer alternative, only it has a few different specifications. The element between a successful choice and failure is the same – responsibility.

To plenty of people, business credit cards are similar to lines of credit, yet there are plenty of differences between them. In fact, the credit card seems to be an interesting alternative, but there are many considerations.

Main difference between small business credit cards and lines of credit

The most obvious difference between lines of credit and  these credit cards is in the revolving credit line. Basically, the credit card provides more freedom. You gain access to a revolving line of credit. On the other hand, the actual line of credit is fixed. It operates like a loan. Once you repay the first loan, you are free to get a second. With credit cards, you can keep borrowing as your repay monthly bills regularly. You take less risks, but you also customize your financial plans according to your necessities. Restrictions are clearly way lower.

small business credit card

What to know about money and interest rates

Think about the amount of money you can take when interested in a credit cards for small bussineses. The interest charge requires attention as well. At this level, the line of credit is more beneficial. You can access more money because it works like a loan. You require a top-notch responsibility or you risk falling. This alternative is great if you require a substantial amount of money, whether you need to invest in equipment or upgrade your facility. Such a loan costs less, mostly because of the low interest rate. Sometimes, the loan can be similar to the credit limit on your card, but these situations are rare.

Collateral – any requirements?

Finally, there is a huge difference between these credit cards and fixed lines of credits when it comes to the collateral. If you get a  this type of business credit card, the collateral is irrelevant and will not add to your application. From this point of view, a credit card is unsecured. You do not have to secure the money with any assets. Instead, you will sign a guaranty that you are entirely liable for paying back every single coin.

In the end, making a final choice is entirely up to you. Different people have different necessities, so take your time and research these possibilities according to your needs.

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