Business Line of Credit vs. Business Credit Card

Both give your business quick access to capital, but they each function a little differently.

Advertising & Editorial DisclosureLast Updated: 10/21/2022
Edited By     |  
Written By     |  
Reviewed By     |  
Last Updated: 10/21/2022

Quick access to capital is vital for most businesses. Two popular ways to get the required money include business credit cards and business lines of credit. The primary differences between the two are found in the interest rates, fees, acceptance and rewards. Besides, whether you should use one or the other also depends on specific scenarios.

On This Page:
tip icon
  1. Business lines of credit tend to offer higher credit limits than business credit cards.
  2. Business credit cards come with interest-free days, whereas business lines of credit don't.
  3. While several business credit cards offer rewards, lines of credit do not.
  4. You may use a business line of credit to pay billers who don't accept credit cards.
tip icon

Get the most out of your business expenses

Sponsored by CardRatings


Learn More >

What Is a Business Credit Card?

A business credit card gives small and mid-sized businesses easy access to credit. Business credit cards tend to come with additional features such as bookkeeping integration, free additional cards for employees and, in some instances, travel benefits such as airport lounge access and complimentary insurance.

One fundamental way a business credit card differs from a personal card is that you get to build your business credit profile by using the former. Once you build a strong business credit history, you get access to more favorable borrowing terms when your business needs access to capital in the future.

Types of businesses that would benefit from a business credit card

Any business that needs quick access to short-term capital may benefit from getting a business credit card. You might consider getting a business credit card if:

  • You need to improve your business cash flow.
  • You plan to make use of interest-free days on purchases.
  • You need to segregate business and personal expenses.
  • You want to maximize your rewards-earning potential across business-oriented categories such as office supplies, travel and shipping.
  • You want to build your business credit.
  • You want to streamline employee spending.
  • You’re looking for travel-related perks.
≫ More: How to Get a Business Credit Card
tip icon

"Select a business credit card based on your specific needs by relying on the ranking methodology we've used to analyze 545 business cards through standardized data points and estimated average spends." — Brett Holzhauer, Credit Card Journalist

What Is a Business Line of Credit (LOC)?

Quite like a business credit card, a business line of credit (LOC) gives your business easy access to credit for meeting short-term business needs. However, while business credit cards are typically unsecured, a business LOC might be secured (by real estate or inventory).

LOCs offer revolving credit up to predetermined limits like credit cards, wherein once you repay the money you borrow, it becomes available to borrow again. However, LOCs tend to come with higher credit limits than business credit cards, all the more so when you’re looking for secured alternatives.

Unlike a business loan that requires you to pay interest on the entire borrowed amount, a business LOC requires that you pay interest only toward the borrowed balance and not the entire line.

Business lines of credit are time-bound and come with draw periods, during which you may access the line as often as you like. During this period, your minimum monthly payments only account for the interest you need to pay. If you have an outstanding balance at the end of the draw period, the lender formulates an installment repayment plan typically set over three to five years.

Types of businesses that would benefit from a line of credit

You may make good use of a line of credit no matter which industry your business belongs to. If your business is prone to experiencing frequent short-term needs for capital, you might consider getting a business LOC. Some of the most common uses of business LOCs include:

  • Purchasing inventory
  • Meeting business expenses during slow periods
  • Making payments that are not acceptable via credit cards (payroll, property lease and specific invoices)

Business Credit Card vs. Business Line of Credit

Whether you need a business credit card or a line of credit depends on the intended use. While a business credit card might work better in one instance, using a business LOC might be more appropriate in another. Incidentally, both give you the means to build your business credit history.

Key Differences Between a Business Line of Credit & Small Business Credit Cards


  • Tracking expenses. Business credit cards tend to give you the ability to integrate your accounts with your existing bookkeeping software. Some even provide detailed category-based expense reports.
  • Employee cards. Business credit cards usually let primary cardholders apply for additional employee cards, often at no extra cost.
  • Rewards. Depending on the rewards credit card you get, you might benefit through higher reward rates when you spend across specific categories such as office supplies, travel and gas.
  • Interest. The interest rate assigned to your business credit card depends on your personal credit score (if you don't have a business credit score yet) because card issuers take your personal creditworthiness into account when making their decisions. If you already have a business credit score, the card issuer will take that into account as well.
  • Interest-free days. As long as you pay off your balances in full before the end of each billing cycle, you pay no interest on purchases made through business credit cards.
  • Fees. While some business cards come with no annual fees, some charge upward of $500 per year. Other fees may come in the form of foreign transaction fees, late fees, cash advance fees and over-limit fees.
  • Added perks. Additional card-specific perks might come in the form of 24/7 access to concierge services, access to presale tickets, purchase protection, extended warranty, status upgrades with flight or hotel reward programs, complimentary airport lounge access, priority boarding, credits toward TSA Precheck, complimentary travel insurance and purchase protection.


  • Higher credit limit. Business LOCs tend to offer higher credit limits than business credit cards.
  • Widespread acceptability. You may use your line of credit to write checks, which is ideal for paying billers who don’t accept credit card payments. Some business LOCs come with access cards that give you easy means to withdraw funds. Setting up direct deposits is also usually an option.
  • Higher interest rate. Business LOC interest rates are typically higher than those of business credit cards.
  • No interest-free days. Once you withdraw funds from your business LOC, interest starts to add up from the day of the transaction.
  • Fees. It is common for LOC providers to charge origination fees of 0.5% to 1% of the credit line, although some do away with this fee completely. You might also need to pay annual maintenance fees, draw fees and late fees.
  • Rewards. You’ll be hard-pressed in finding a business LOC that offers rewards.
  • No added perks. Other than access to revolving credit, there is little else you can expect from a business LOC.
tip icon

"If you are considering the business credit card route, you may want to have more than one business credit card to stack rewards. With the right credit card strategy, you could net thousands of dollars in tax-free rewards." — Brett Holzhauer, Credit Card Journalist

Other Questions You May Have About Business Credit

This section provides answers to commonly asked questions about how business lines of credit compare with business credit cards.

Next Steps

Now that you know how business credit cards and lines of credit compare against each other, decide which one might work better for you based on your specific requirements. No matter which of the two you select, settle on a specific line of credit or a credit card only after accounting for aspects such as interest rates and fees.

Compare & Review Credit Cards

The experts at MoneyGeek evaluate the spending habits of businesses across the country based on data released by the Bureau of Labor Statistics (BLS). They have reviewed 545 business credit cards to date so that you can look for options based on your business requirements with ease.

Learn More About Business Credit Cards

The editorial team at MoneyGeek gives due importance to research and stays up-to-date with the latest trends and news surrounding credit for businesses. With decades of combined experience between the team's members, you can trust them to answer your questions about business credit cards, LOCs and loans factually and quickly.

This is a bank icon
What is the best balance transfer credit card?
This is a bank icon
How does credit and credit cards work for students?
This is a bank icon
What is the best credit card for fair or average credit?
This is a bank icon
What is the best cash advance credit card?
This is a bank icon
What is the best cash back credit card?
This is a bank icon
What is the best gas credit card?

About the Author

Rajiv Baniwal has been writing about different financial topics for over 15 years. Meticulous in his research, he makes sure he provides accurate and up-to-date information. His areas of expertise include mortgages, personal loans, credit cards, insurance and international money transfers.

*Rates, fees or bonuses may vary or include specific stipulations. The content on this page is accurate as of the posting/last updated date; however, some of the offers mentioned may have expired. We recommend visiting the card issuer’s website for the most up-to-date information available.
Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, credit card issuer, hotel, airline, or other entity.
Advertiser Disclosure: MoneyGeek has partnered with and for our coverage of credit card products. MoneyGeek, CardRatings and may receive a commission from card issuers. To ensure thorough comparisons and reviews, MoneyGeek features products from both paid partners and unaffiliated card issuers that are not paid partners.