The Advantages of a Line of Credit over a Credit Card

The allure of a credit card can be a strong one as they often come with claims of no annual fee and no or low interest for 12 or 24 months. The fine print behind these offers however, may be much less attractive. You may have to pay hefty administration fees when you apply. Later on, many purchasers find themselves paying high interest rates after a favourable introductory rate is phased out.

Fortunately, there are less costly ways to access credit. Setting up a personal line of credit, for example, gives you access to a pool of money whenever you need it. You can choose to pay for items directly from your line of credit using your bank card with Interac Direct Payment, withdraw cash from a bank machine, or transfer funds from your line of credit to pay bills online or over the telephone. Competitive interest rates are lower than many retail credit cards, and you pay interest only on the amount you borrow.

If you already have a number of retail credit cards, you may want to consider consolidating your debt balances into a single personal line of credit. This could reduce your debt payments and save you a significant amount of money.

Consolidating your balances has another significant benefit: it becomes much easier to monitor and control your borrowing. You may also want to consider using CIBC online banking, which provides you with options such as a consolidated view of your investments and your loans. You can review your balances, make additional payments, and view your payment history whenever it's convenient for you.

The high cost of retail credit cards

Suppose you have an outstanding balance of $15,000 on your credit card charging an annual interest rate of 28%. If you pay that debt back over a year, you're looking at $2,367.60 in interest charges. With a personal line of credit secured against the equity in your home at a rate of 5.75%, you're looking at paying just $471.12 in interest over that time period. That's a savings of $1,896.48 with a line of credit.

With a broad range of options available and access to online tools, a CIBC advisor can recommend appropriate credit solutions to help you reach your long-term goals.

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