What’s the Difference Between a Signature Line of Credit and a Credit Card?
When it comes to borrowing money, both a signature line of credit and a credit card are options to help you achieve your financial goals. Most people are familiar with a credit card and how it works, but what about a signature line of credit? Here are the differences between a signature line of credit and a credit card.
Signature Line of Credit
A signature line of credit is a set amount of money you can draw from whenever you need it. This provides more flexibility than a typical loan. A signature line of credit works similarly to a credit card in that you can borrow as much or as little as you need, and you only pay interest on the money you use. With a Partner Colorado signature line of credit, you can easily advance money from your signature line of credit into your checking account. This allows you to use your debit card for spending.
When applying for a signature line of credit, lenders look at your credit history, credit score, income and expenses. Typically, a credit score of somewhere around 640 or higher is needed. Once approved, the process is fairly quick and your account is set up within a matter of days.
Most Common Uses
Signature lines of credit are most often used for long-term or unexpected expenses. Some examples of common uses for a signature line of credit are larger, unexpected home repairs like replacing a broken water heater or air conditioner, larger, unexpected medical expenses and even debt consolidation.
Similar to a credit card, once you use your signature line of credit, payments must then be made on a monthly basis and there is a minimum payment due. With a Partner Colorado signature line of credit, members pay three percent of the outstanding balance. For example, if your signature line of credit is for $5,000 and your balance is $3,200, your monthly payment would be $96.
Interest rates for signature lines of credit are normally lower than interest rates for credit cards. They can either be variable and fluctuate or be fixed and stay the same for the duration of the term.
A credit card lets you spend money up to a set limit. You are charged interest on the money you spend. One added bonus is most credit cards now offer perks like cash back or rewards.
When applying for a credit card, lenders also look at your credit history, credit score, income and expenses. Credit cards are usually more lenient and accept a wider range of credit scores. Once approved, you’ll receive your credit card to use in the mail.
Most Common Uses
Credit cards are most often used for short-term or everyday expenses like buying groceries, gas or online purchases.
Credit cards are used at the point of purchase. Once you make a purchase, it’s added to your balance due. Each month, a minimum payment is due. While you’re only required to pay the minimum balance due each month, it’s in your best interest to pay the amount in full each month or as much as you possibly can. Credit cards usually have high interest rates, and you’ll just end up owing more in interest by not paying off the full balance.
Credit card interest rates are normally higher than any type of loan or line of credit. Almost all credit cards have variable rates that can fluctuate. Signature lines of credit and credit cards each have their own purpose and benefits. Knowing the difference between the two will help you determine what’s best for you based on your financial needs. If a signature line of credit or credit card isn’t your thing, a signature loan is another option for borrowing money. Rather than a revolving line of credit that lets you draw from it whenever you choose, a signature loan is money borrowed in a single lump sum. You can borrow up to $15,000 and choose between a 24- or 36-month term. It’s repaid in equal monthly payments and can be used for any purpose.
No matter what you’re needing to borrow money for, it’s best to research your options first and figure out what’s best for you and your situation.