Credit Lines

Posted in Tips

What is a traditional credit line?

How does it differ from a credit card?

By definition a credit line is any source of credit extended to a government, business or individual by a bank or some other financial institution. It can take several different forms. It can be overdraft protection, term or demand loan etc. It is essentially a bank account that can be utilized at the borrower’s discretion. Interest is only paid on the money that is withdrawn. The lines of credit can be secured by collateral or unsecured.

The lines of credit are generally only extended to those that prove creditworthiness. This means tax returns are needed and examined carefully.

Credit lines are different than credit cards as it acts more as cash. One is able to write checks, pay employees and once the money is gone, it is gone. The credit cards are more for purchases and inventory and once you use the money you can pay it off and utilize it again.

Though they both allow for excess capital they are not the same.  Their uses are different and the way they are obtained is different as well as most credit cards do not exam your tax returns.

I hope this helps to clear up the differences between the two.

Here are some links for references if you would like to learn more:

https://www.wellsfargo.com/personal_credit/

http://www.investopedia.com/terms/l/lineofcredit.asp

https://www.pnc.com/webapp/unsec/ProductsAndService.do?siteArea=/pnccorp/PNC/Home/Personal/Loans/Loans+and+Lines+of+Credit

 


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