Commercial Line of Credit vs. Business Credit Card
Both a commercial line of credit and a business credit card provide revolving access to credit, but they differ significantly in cost, flexibility, credit limits, and how they are underwritten. Understanding those differences helps you choose the right tool for each business need.
Side-by-side comparison
The differences are meaningful across every key dimension.
| Feature | Commercial line of credit | Business credit card |
|---|---|---|
| Typical limit | $25K–$1M+ | $5K–$100K (most) |
| Interest rate | Varies; often lower for qualified borrowers | 16%–28%+ typical APR |
| Grace period | Typically none | 20–55 days if paid in full |
| Cash access | Direct; typically low or no fee | Cash advance fees; high rates |
| Underwriting | Full business underwriting | Often credit-score focused |
| Rewards | Typically none | Points, miles, cash back common |
| PG required | Often, depends on size | Typically yes for small business |
When to use a line of credit
A line of credit is better suited for: larger draws (tens of thousands of dollars), payroll, vendor payments, and any use case where a card isn't accepted. It's also typically less expensive for large balances that won't be paid off monthly.
When to use a business credit card
A business credit card is better for: frequent small purchases, travel expenses, online vendors, earning rewards, and situations where a grace period makes the effective rate zero (if paid monthly). Cards also provide an audit trail useful for expense management.
Interest cost at scale
If you carry a $30,000 balance, the difference between a 14% line of credit and a 24% credit card is $3,000/year in additional interest. At larger balances, this gap becomes a meaningful operational cost.
Business credit card rates vary widely. Read the cardholder agreement for your specific card.
Frequently Asked Questions
- Can I use a business credit card instead of a line of credit for working capital?
- You can, but credit cards typically carry higher rates for balances carried month-to-month, have lower limits, and are less suited for large draws like payroll. For working capital at scale, a line of credit is generally more cost-efficient.