Business Credit Card vs Line of Credit: Which Costs Less?

A business credit card costs less if you spend under $30,000 per year and pay the balance in full each month within the interest-free period. A business line of credit costs less for revolving balances above that threshold, because the interest rate is roughly half what a credit card charges. The right choice depends on how much you spend, how quickly you repay, and whether you need a physical card.

How each product works

Both products give your business revolving access to funds, but the cost mechanics are different. Understanding the structure is the first step to comparing total cost.

The critical difference is the interest-free period. A credit card gives you 44 to 55 days of free credit on purchases if you pay the full balance by the due date. A business line of credit charges interest from the day you draw, but at a lower rate. This makes the credit card cheaper for short-term spending you can repay quickly, and the line of credit cheaper for larger or longer-term working capital needs.

The real cost comparison: three scenarios

The numbers below compare the annual cost of each product across three spending levels. The credit card assumes a 20% p.a. purchase rate, $250 annual fee, and that the business pays the balance in full within the interest-free period 80% of the time (carrying a balance for one month on the remaining 20%). The line of credit assumes a 12% p.a. interest rate with a 1.5% line fee on a $100,000 limit.

These numbers shift dramatically if you carry a balance month to month. At $50,000 in revolving debt where you cannot pay in full, the credit card costs roughly $10,000 per year in interest (20% on $50,000) while the line of credit costs $7,500 (12% interest plus the line fee). The crossover point is roughly $30,000 in ongoing revolving balance, where the line of credit's lower rate overtakes the credit card's interest-free advantage.

When a business credit card is the better choice

A credit card suits businesses that can pay the balance in full each month. If you consistently clear your statement, you are effectively borrowing at 0% for 44 to 55 days. The annual fee is the only real cost.

Credit cards also suit businesses that benefit from rewards. Australia has around 733,000 commercial credit card accounts, with average monthly spending of approximately $12,359 per account. At that spend level with a 1% cashback card, a business earns roughly $1,500 per year in rewards, which can offset the annual fee entirely.

A credit card also works well for expense management. Individual cards for staff members, automated categorisation, and integration with accounting software make credit cards a practical tool for tracking day-to-day spending.

When a line of credit is the better choice

A line of credit suits businesses that need larger amounts, carry revolving balances, or need cash transferred directly to their account rather than making card purchases.

If your business regularly carries a balance of $30,000 or more, the interest rate difference becomes decisive. At 12% versus 20%, a $50,000 revolving balance costs $4,000 less per year on a line of credit. Business credit card balances accruing interest grew 14% year-on-year to January 2026, which suggests more businesses are carrying balances and paying the higher card rate when a line of credit might cost less.

A line of credit also gives you direct access to cash at the standard rate. Credit card cash advances typically attract rates above 22% with no interest-free period and a transaction fee of 2% to 3%. If you need to pay suppliers who do not accept card payments, a small business line of credit avoids the cash advance penalty entirely.

Lines of credit also offer higher limits. Most business credit cards cap at $50,000. A non-bank line of credit can extend to $500,000 unsecured, making it the only realistic option for businesses with larger working capital needs.

Can you use both?

Yes, and many businesses do. A practical structure is to use a credit card for day-to-day purchases under $50,000 per year (capturing the interest-free period and rewards), and a line of credit as a safety net for larger or irregular cash flow gaps. The two products serve different purposes and do not compete if you manage them separately.

The key is to avoid using the credit card as a de facto line of credit by carrying a balance month to month. If you find yourself consistently unable to pay the full statement balance, that is the signal to move the revolving portion to a lower-rate facility. A business loan or line of credit will almost always cost less than credit card interest on carried balances.

Subject to lender approval, terms, and conditions apply.

This article is general information only and is not financial advice.