# The Battle of the Credits
Facing unexpected expenses isn’t fun. Truthfully, even expected expenses aren’t fun when your cash flow doesn’t match the amount needed to make things work. The past few years have been wild, to say the least, and financially speaking many people find themselves in a pickle quite frequently. If you’re facing an expense that’s a little larger than your savings account, or you want to keep your savings intact and make payments to cover upcoming expenses, you’re likely considering your options carefully. A [personal line of credit](https://www.aviocredit.com/line-of-credit/) is a great option for many people, but sometimes a credit card is the way to go. You’ll want to analyze your situation and options, the amount you need, and how you’d like to handle budgeting the expense prior to choosing between a personal line of credit vs a credit card.
## Tip #1: Better Start with the Basics
So how does it all work? Credit cards and personal lines of credit are more similar than you may have guessed, but there are a few distinctions between the two. Take a deeper dive and as always, make sure you do thorough research before making any decisions.
### What is a personal line of credit?
Chances are you’re quite familiar with the way a credit card works, but are you as familiar with a personal line of credit? You may be surprised to learn that a personal line of credit is actually quite [similar to a credit card](https://www.consumerfinance.gov/ask-cfpb/what-is-a-personal-line-of-credit-en-901/)<a href="#one"><sup></sup></a> in many ways. After your approval for a personal line of credit and after accessing the needed funds, you’ll receive a statement each month detailing your spending and the payment that is due. You’ll pay payments monthly on the money that was borrowed, and you’ll [pay interest on the money](https://www.aviocredit.com/resources/574/personal-loan-facts/how-does-a-line-of-credit-work)<a href="#three"><sup></sup></a>that you have borrowed as well. You also have the option to pay off the full balance if you choose to do so.
You can draw from the personal line of credit (adding to your balance which you’ll make payments on) as you need it a little at a time. You can borrow as much from the limit as you would like without reapplying, and you are capped at the limit of the loan which will be determined at the time of your application and subsequent approval. In a nutshell, you’ll have access to a loan that you can borrow in small chunks as needed instead of taking out the entire loan at once. This is a great option if you are not sure exactly how much money you’re going to need access to.
#### Is a Personal Line of Credit Right for Me?
When would this option be a great resource? Perhaps you have [expenses that will be ongoing](https://www.nerdwallet.com/article/loans/personal-loans/personal-line-credit)<a href="#four"><sup></sup></a>and you need a helping hand to keep funds flowing a little at a time. Perhaps you have a larger expense that will be due in installments, and you don’t know what the full amount will be quite yet. Bottom line? Any time you need access to funds a little at a time and want to only pay on what you borrowed plus interest; a personal line of credit may be an option to consider.
### What is a credit card?
A credit card can offer spending power and flexibility to card holders globally. Credit cards are utilized by people all over the world to securely pay for day-to-day items as well as larger purchases when payments are necessary. Retailers often offer in-store credit cards that can be used only at that particular store and offer incentives that sometimes include discounts or better shipping options. Major credit card companies are seen flashing their logos globally and are recognized as a safe way to pay for just about anything. We even give toy credit cards to kids so they can practice swiping sometimes even before they can talk. I have some thoughts about that, but I’ll save them for another time.
A credit card offers a spending limit, usually determined by the card holder's financial status which can include credit score, ability to repay, income etc. All of this is determined by the company issuing the card. Credit card statements arrive monthly, and monthly payments are made. Credit cards offer various interest rates, also determined by the card issuer. Make sure to research the pros and cons of the specific card you’re considering before signing up and as always use your credit power responsibly.
## Tip #2: Weigh Out the Pros and Cons
### Team Credit Card
⦁ PROS: For many Americans, getting a credit card is their very [first financial #adulting move](https://www.forbes.com/sites/catherineschnaubelt/2019/02/15/the-pros-and-cons-of-credit-cards/?sh=449bda951e8b)<a href="#five"><sup></sup></a>in life. I know the first time I received a credit card offer in the mail; I was pretty excited. The mountain of debt I found myself in shortly after wasn’t as thrilling, but we’ll save that story for another time. One of the biggest benefits of responsibly (key word: responsibly) utilizing a credit card is building credit. It’s a fairly simple way to obtain credit, build it, and then keep it on track by paying on time, keeping your credit utilization under the suggested max, and building good payment history. When you have a good credit score, the door to obtaining additional credit opens a little wider. Credit cards are also a safer way to pay for things than with your hard-earned cash. There are protections in place against fraud, and many credit card companies offer incentives to spend on daily items and [offer points or other cool things](https://www.nerdwallet.com/ca/credit-cards/line-of-credit-vs-credit-card)<a href="#seven"><sup></sup></a> in exchange!
⦁ CONS: Credit cards usually live in your wallet, right next to your debit card. It’s easy to grab and swipe your credit card any time you don’t have the funds readily available in your checking account. This can lead to overspending and you find yourself in a little more debt than you bargained for when you placed that shiny new card in your wallet. High APRs (Annual Percentage Rates) can make it hard to pay down the principal on your credit card, and the cycle can get out of hand for some people. However, if you use credit cards responsibly, you have a great tool at your disposal. As with all credit, consider your options and make choices according to your situation and ability to repay any debt you will incur.
### Team Personal Line of Credit
⦁ PROS: Obtaining a personal line of credit is often a [speedier option than securing a credit card](https://www.forbes.com/advisor/personal-finance/what-is-a-line-of-credit/)<a href="#two"><sup></sup></a> because lending decisions are typically made rather quickly, sometimes within the same day as applying, and funds are available soon after. A credit card requires approval and then receipt of the new, physical credit card in the mail. When you work with Avío Credit, funds are typically [available within one business day](https://www.aviocredit.com/faqs/line-of-credit/). When you’re facing a larger expense and need cash in hand more quickly, a line of credit is a great option. It’s also easy to move the money into your personal account and utilize the funds as you need them. Some personal lines of credit offer [lower interest rates](https://www.nerdwallet.com/ca/credit-cards/line-of-credit-vs-credit-card)<a href="#seven"><sup></sup></a> than other loans and even rates that are lower than some credit cards, so check with your lender and compare rates when considering all of your options.
⦁ CONS: Interest rates are on the rise in every sector, so make sure that you assess all of your options and the interest rates associated with your choices prior to making a final decision. In some cases, a personal line of credit may have a [higher interest rate](https://www.forbes.com/advisor/personal-finance/what-is-a-line-of-credit/)<a href="#two"><sup></sup></a> than other options, so make sure you speak at length with your lender to ensure you understand the interest rate and how it works when borrowing from the line of credit. Interest rates are also listed above as a potential pro, and that is why it is extremely important that you weigh the options you have available. Interest rates are different depending on the lender and loan option you choose. You should always look carefully at the rates and terms available to you in comparison with other options when making a decision to take out a loan of any kind. When you work with a reputable lender, like [Avío Credit](https://www.aviocredit.com/), you’ll get answers to your questions and have a great team to speak with about all of your questions.
No matter who you choose to obtain a personal line of credit from, make sure you feel comfortable with the service being offered and that all of your questions are answered.
## Tip #3: Create a Project and/or Expense Budget
No matter the option you choose, you will want to create a budget. If you’re planning a large project or taking on a larger expense and planning to use a line of credit or credit card, start with a budget. You can utilize the [SMART Goals Method](https://www.aviocredit.com/resources/187/Personal-Loan-Facts/how-to-use-smart-goals-to-achieve-your-financial-goals/)<a href="#six"><sup></sup></a>when building a plan to create small, attainable goals that add up to a big win of your choosing. When you know how much money you need to borrow, based on the budgeting work you’ve already done to create a reasonable plan, you will keep yourself within those boundaries and achieve repayment much more quickly. Being debt free is an incredible goal for most Americans, and one that can be very hard to achieve. When you break your goal into bite sized chunks, and work to pre-plan your borrowing, you will be more likely to reach debt free status.
## No Matter What, Choose a Company You Can Trust
Working with a team you can trust is important to most of us. We want to feel confident that if we have a question, it will be answered. We especially want to feel that we are being given the opportunity to ask questions freely so that we fully understand what we’re getting into when working with a lender. Whether you choose to obtain a credit card or take out a personal line of credit, you want to work with a company you feel certain you can trust. Work only with reputable lenders who provide easy access to customer service and share their terms, rates, and information about their loan or credit products up front. There should be no surprises when working with a lender, so make sure you ask for all of the information about how your personal line of credit or credit card will work, what the interest will be, how much your payments will be monthly, and all of the terms of the loan including loan repayment due dates. Avío Credit can be a great option if you’re choosing to take out a personal line of credit!
<div id="one"><sup></sup>Consumer Financial Protection Bureau (2022, February 22). *What is a Personal Line of Credit?* Retrieved from: [https://www.consumerfinance.gov/ask-cfpb/what-is-a-personal-line-of-credit-en-901/] (https://www.consumerfinance.gov/ask-cfpb/what-is-a-personal-line-of-credit-en-901/)
<div id="two"><sup></sup>Treece, Kiah (2020, June 23). *What is a Line of Credit?* Retrieved from: [https://www.forbes.com/advisor/personal-finance/what-is-a-line-of-credit/](https://www.forbes.com/advisor/personal-finance/what-is-a-line-of-credit/)
<div id="three"><sup></sup>Avío Credit (2022, July 11). *How Does a Line of Credit Work?* Retrieved from: [https://www.aviocredit.com/resources/574/personal-loan-facts/how-does-a-line-of-credit-work](https://www.aviocredit.com/resources/574/personal-loan-facts/how-does-a-line-of-credit-work)
<div id="four"><sup></sup>Millerbernd, Annie (2022, January 7). *What is a Line of Credit?* Retrieved from: [https://www.nerdwallet.com/article/loans/personal-loans/personal-line-credit](https://www.nerdwallet.com/article/loans/personal-loans/personal-line-credit)
<div id="five"><sup></sup>Schnaubelt, Catherine (2019, February 15). *The Pros and Cons of Credit Cards* Retrieved from: [https://www.forbes.com/sites/catherineschnaubelt/2019/02/15/the-pros-and-cons-of-credit-cards/?sh=30a8666f1e8b](https://www.forbes.com/sites/catherineschnaubelt/2019/02/15/the-pros-and-cons-of-credit-cards/?sh=30a8666f1e8b)
<div id="six"><sup></sup>Avío Credit (2019, October 29). *How to Use SMART Goals to Achieve Your Financial Goals* Retrieved from: [https://www.aviocredit.com/resources/187/Personal-Loan-Facts/how-to-use-smart-goals-to-achieve-your-financial-goals/](https://www.aviocredit.com/resources/187/Personal-Loan-Facts/how-to-use-smart-goals-to-achieve-your-financial-goals/)
<div id="seven"><sup></sup>Logan, Hannah (2021, July 15). *How Does a Line of Credit Compare to a Credit Card?* Retrieved from: [https://www.nerdwallet.com/ca/credit-cards/line-of-credit-vs-credit-card](https://www.nerdwallet.com/ca/credit-cards/line-of-credit-vs-credit-card)