A credit card is best for everyday spending you pay off in full each month, because new purchases get at least 21 days interest-free. A line of credit is usually cheaper for borrowing you’ll pay back over months, because the rate is usually lower, but interest starts the day you take the money out. Here’s how they differ, when to use each, and a calculator to see what moving a card balance would save you.
The key differences at a glance
| Credit card | Line of credit | |
|---|---|---|
| How you use it | Tap or swipe to buy things | Transfer money to your bank account, write a cheque or pay a bill |
| Interest-free period | At least 21 days on new purchases if you pay in full | None. Interest starts the day you withdraw |
| Interest rate | Often around 19% on purchases (FCAC example) | Usually lower than a card, and usually variable |
| Minimum payment | Usually 3% of the balance or $10 plus interest | Often just the monthly interest |
| Rewards | Cash back or points on most cards | None |
| Cash withdrawals | Expensive: fee plus interest from day one | Normal way to use it |
| Secured by your home? | No | Only if it’s a home equity line of credit (HELOC) |
| Best for | Everyday spending you clear each month | Larger costs or paying down higher-rate debt |
How a credit card works
A credit card gives you a limit you can spend up to. As you pay it down, you can spend again. This is called revolving credit.
The big advantage is the grace period. Federally regulated banks must give you at least 21 days after your statement date to pay for new purchases before interest is charged. If you pay your full statement balance by the due date every month, a credit card costs you nothing in interest, and you earn rewards on top.
The catch is the rate if you don’t pay in full. The Financial Consumer Agency of Canada (FCAC) uses 19% on purchases and 22% on cash advances as typical examples. Cash advances, cash-like transactions and balance transfers have no grace period at all.
How a line of credit works
A line of credit also has a limit you can borrow up to, pay back and borrow again. But you don’t shop with it directly. You move money into your chequing account, write a cheque or pay a bill from it.
- Interest from day one: you pay interest from the day you withdraw money until you pay it back. There’s no grace period.
- Lower rate: the FCAC says you usually pay a lower rate on a line of credit than on a credit card. Your credit score, income and existing debt affect the rate you get.
- Variable rate: most line of credit rates go up and down with market rates, so your cost can change.
- Interest-only minimum: the minimum payment is usually just the monthly interest. Pay only that and the balance never goes down.
- Possible fees: some charge a registration or administration fee. Some don’t.
Banks usually want a minimum household income and a good credit history before approving one.
Calculator: what would a line of credit save you?
Line of credit vs credit card calculatorEnter a balance you owe and what you can pay each month. See how long each takes to clear and how much interest you pay.
Your balance and payment
Interest you save
On the card
On the line of credit
Side by side
| Credit card | Line of credit |
|---|
Types of lines of credit
| Type | What it is | Watch for |
|---|---|---|
| Personal (unsecured) | Based on your income and credit, with nothing put up as security | Higher rate than a secured line |
| Home equity (HELOC) | Secured by your home. You can borrow up to 65% of your home’s value | Your home is at risk if you can’t pay. Setup can mean appraisal and legal fees |
| Student | For post-secondary costs, often with a co-signer | You pay at least the interest while studying. Full payments usually start 6 to 12 months after you graduate |
A HELOC usually has the lowest rate and the highest limit because your home backs it. That also makes it the riskiest: if you can’t pay, you could lose your home.
Which is better for your credit score?
Lenders look at how much of your available credit you’re using, called credit utilization. The FCAC suggests using less than 30% of your total credit limit. It also says having different types of credit, such as a credit card and a line of credit, can help your score, while having only one type may lower it.
Payment history matters most. Whichever you use, make at least the minimum payment on time every month. Try our credit utilization calculator to see where you stand.
Should you use a line of credit to pay off a credit card?
It can save a lot of interest. A line of credit at a lower rate means more of each payment goes to the balance. The FCAC lists it as one way to consolidate debt, with two warnings:
- If you keep using the card, you end up with two debts instead of one.
- Paying only the interest-only minimum on the line of credit can make the debt last longer and cost more overall.
Set a fixed monthly payment that clears the balance in a set time, and stick to it. A balance transfer card with a low introductory rate is another option, usually for 6 to 18 months, but there’s normally a fee. To compare payment plans, see our credit card payoff calculator and debt repayment calculator.
When to use which
| Situation | Better choice | Why |
|---|---|---|
| Groceries, gas, bills you pay in full | Credit card | No interest and you earn rewards |
| A purchase you’ll pay off over several months | Line of credit | Lower rate than carrying a card balance |
| Paying down a high-rate card balance | Line of credit | Less interest, if you stop using the card |
| Need cash | Line of credit | Card cash advances charge a fee and interest from day one |
| Emergency backup | Either, with a plan | A line of credit is cheaper for anything you can’t repay quickly |
| Big home renovation | HELOC | Lowest rate, but your home is security |
Frequently asked questions
Is a line of credit better than a credit card?
For borrowing you’ll pay back over time, usually yes, because the rate is usually lower. For everyday spending you pay off in full, a credit card is better because new purchases get at least 21 days interest-free and you earn rewards.
Does a line of credit have a grace period?
No. You pay interest from the day you withdraw money until you pay it back. Credit cards give at least 21 days interest-free on new purchases if you pay the balance in full.
What is the minimum payment on a line of credit?
It’s usually the monthly interest. Paying only that means the balance never goes down, so pay more whenever you can.
Is it smart to pay off a credit card with a line of credit?
It can save interest if the line of credit rate is lower and you stop adding to the card. If you keep spending on the card, you end up with more debt.
Does a line of credit affect your credit score?
It can. Paying on time helps and missing payments hurts, just like a card. The FCAC also says having different types of credit, such as a credit card and a line of credit, can help your score, and suggests using less than 30% of your total credit limit.
How much can you borrow with a home equity line of credit?
Up to 65% of your home’s value, according to the FCAC. The rate is usually variable, and your home is security for what you borrow.
What is the minimum payment on a credit card in Canada?
Usually a flat amount, often $10, plus interest and fees, or the higher of about $10 and 3% of the balance. In Quebec, the minimum is 5% of the balance.
Can I use a line of credit like a credit card?
Not directly in stores. You move money into your bank account, write a cheque or pay a bill from it, then pay it back.
Related reading
- Credit card interest calculator: what carrying a balance costs
- Minimum payment calculator: how long minimum payments take
- Credit card payoff calculator: plan a debt-free date
- Statement balance vs current balance: which one to pay
- Credit utilization calculator: check your ratio
- Daily interest calculator: interest charged day by day
- Debt-to-income ratio calculator: how lenders see your debt
How we checked: The grace period, cash advance rules, example card rates and minimum payment formulas come from the Financial Consumer Agency of Canada (FCAC) pages on how credit cards work and paying off your card. How lines of credit charge interest, minimum payments, fees and rates come from the FCAC page on lines of credit. The HELOC limit comes from the FCAC page on borrowing against home equity, and student line of credit rules from its student lines of credit page. Credit score guidance comes from the FCAC page on improving your credit score, and debt consolidation warnings from its debt consolidation page. Rates vary by lender and change over time, so the calculator uses example rates you can change. It assumes a fixed rate, the same payment every month and no new spending. This page is general information, not financial advice. Sources: FCAC: Lines of credit; FCAC: How credit cards work; FCAC: Paying off your credit card; FCAC: Borrowing against home equity; FCAC: Student lines of credit; FCAC: Improving your credit score; FCAC: Debt consolidation. Last checked October 2026.