What distinguishes a credit card from a line of credit?

A credit card is classified as a type of revolving credit that comes with a fixed credit limit. This means that cardholders can borrow against their available credit up to a certain amount, pay it back, and then borrow again without needing to reapply for a new loan. The revolving nature allows for ongoing access to credit as long as the account remains in good standing and payments are made on time.

In contrast, a line of credit can be secured or unsecured and is often more flexible with its terms, but it differs from a credit card in several respects. The nature of repayment and the way credit limits are handled can vary. A line of credit may offer different borrowing terms, such as requiring fixed payments over time, distinguishing it from the revolving structure of credit cards.

Understanding these distinctions helps consumers make informed decisions about how they manage their credit, ensuring they choose the right type of credit product that suits their financial needs.