Quick answer
A business credit card is a payment tool with a modest limit and interest-free days if you clear the balance in full each statement. A business line of credit is a borrowing facility: a larger limit you draw into your bank account and repay as cash arrives, usually with interest from the day you draw plus a line fee. Cards suit everyday spending; lines of credit suit recurring cash flow gaps.
Key points
- A card is cheapest as a payment tool you clear every month and dearest as a loan you roll over
- A line of credit pays cash into your account, so it covers wages, the ATO and suppliers who won't take cards
- Line fees are often charged on the whole limit, drawn or not, so an oversized limit costs money
- From 1 October 2026 surcharges were removed on eftpos, Mastercard and Visa card payments, making card payments to suppliers cheaper
- Many owners run both: a card for day-to-day spending, a line for the gaps between paying and getting paid
- Card limit
- Usually thousands to tens of thousands
- Line of credit limit
- Tens of thousands upward; larger with property
- Cost when cleared monthly
- Card: annual fee only; line: line fee plus interest on days drawn
- Pays wages and the ATO?
- Card: not usually; line: yes
On paper these look like twins. Both give you a limit, both let you borrow, repay and borrow again, and both are called revolving credit. In practice they behave so differently that choosing the wrong one is a common, quietly expensive mistake. The card is designed to be cleared. The line is designed to be used.
What’s actually different?
| Feature | Card | Line |
|---|---|---|
| What it is | A payment card with a spending limit | A facility you draw cash from, up to a limit |
| Where the money goes | Straight to the merchant at the point of sale | Into your business bank account |
| Typical limit | Thousands to tens of thousands | Tens of thousands upward; much more against property |
| Interest-free period | Yes, on purchases, if the full balance is cleared by the due date | No; interest usually runs from the day you draw |
| Fees | Annual fee, plus cash advance and late fees | Establishment fee, line fee on the limit, sometimes drawdown fees |
| Repayment | Minimum monthly payment; anything left accrues interest | Varies: interest-only on the balance, or each drawing repaid over a set term |
| Pays wages, rent, the ATO | Not easily | Yes |
| Extras | Points, staff cards, expense tracking | Rarely any |
| Security | Unsecured, usually with a director guarantee | Unsecured or secured against property |
How each one costs you money
The government’s business portal describes a line of credit simply as the right to withdraw up to an approved limit. That simplicity hides the real cost driver: time.
On a card, purchases cost nothing in interest if every statement is paid in full. Once a balance rolls over, interest typically applies and the interest-free days on new purchases may disappear until the card is cleared. Cash withdrawals and cash-like payments usually attract a cash advance fee plus interest from day one, which makes a card a poor way to get hold of actual cash. The cash advance glossary entry explains the mechanics.
On a line of credit, you pay interest on the balance for the days it’s drawn, and often a line fee calculated on the full approved amount, used or idle. A $150k line drawn to $40k for two months still attracts the fee on $150k. That’s the trap with lines: owners ask for the biggest limit available “just in case” and then pay for headroom they never touch.
So the dollar comparison is roughly this. Spending you’ll repay within about a month belongs on the card. Spending that takes two, three or six months to come back to you belongs on the line, because rolling a card balance for that long is usually the dearer path.
What changed with surcharges in October 2026?
Since 1 October 2026, merchants may no longer add a surcharge to debit, prepaid or credit card payments processed on the eftpos, Mastercard and Visa networks. The same RBA package lowered the interchange fees businesses pay on domestic card transactions. Two practical effects for this comparison:
- As a buyer, paying a supplier on one of those networks by card should no longer come with a surcharge. That makes the card more attractive for supplier bills it can cover, because you collect the interest-free days without paying extra for the privilege.
- As a seller, you can’t pass card costs on to customers as a surcharge any more. Lower interchange should soften that, but if your margins are tight, it’s worth reworking your pricing before your next cash flow plan.
The RBA has flagged further changes, including a cap on foreign card interchange, from 1 April 2027.
When does the credit card win?
- Everyday operating spend. Fuel, software subscriptions, advertising, travel, small parts orders.
- You can clear it monthly. If the balance reliably comes back to zero, the card works as a few weeks of interest-free float.
- Staff need to spend. Individual cards with their own limits beat handing out bank details or reimbursing receipts.
- Tracking matters. Card feeds into accounting software make reconciling simple.
- Your suppliers are card-friendly. With surcharges gone on the main networks, paying by card costs no more than paying by transfer.
If that’s you, our page on business credit cards covers limits, fees and what issuers look at.
Where does the line of credit come out ahead?
- The gap lasts longer than a statement cycle. Stock bought in September, sold over summer, paid for in January.
- The bill can’t go on a card. Wages, super, rent paid by transfer, and many supplier accounts.
- You need a larger limit. Lines sized on turnover or secured on property go well beyond typical card limits.
- Customers pay slowly. A line bridges 30, 60 or 90-day debtor terms without a new application each time.
- Your bank said no to a bigger overdraft. Non-bank lines are a common next step; see refused a business overdraft increase.
To size a line properly, model the shortfall in the cash flow gap calculator and set the limit at the gap plus a sensible buffer, not the maximum on offer.
Want a second opinion on which suits your pattern? Start a one-minute enquiry here. It doesn’t count as a credit application.
An example from a trade business
Illustrative only. An electrical contractor turns over about $1.4m a year. Materials from the wholesaler run to about $25k a month, and commercial clients pay in 45 to 60 days.
- On the card, the owner puts fuel, tools and the software bill (around $6k a month) and clears it in full. Cost: the annual fee, plus points that cover a flight or two.
- The wholesaler account and the fortnightly payroll sit on a $100k line of credit, drawn when a big job starts and repaid when the progress claim lands. Cost: interest for the weeks it’s drawn, plus the line fee.
Had the owner tried to run the materials through the card, the balance would roll over every month, interest would pile up, and the limit would run out halfway through a job. Had they used the line for fuel and software, they’d be paying interest on spending the card would have floated for free.
Decision checklist
- Will this spending be repaid within one statement cycle? Card.
- Does the payment need to leave as a bank transfer? Line.
- What’s the largest gap between paying out and getting paid? That’s your line limit, plus a buffer.
- Is there a line fee on the full limit? Then don’t over-size it.
- How does each drawdown have to be repaid: interest-only, or over a fixed term? Ask before signing.
- Are you also comparing an overdraft? Read overdraft vs line of credit next.
Need the line, not just the card?
When the gap is bigger than a card limit and longer than a statement, it’s time to look at a proper facility, and that’s the part we can help with. Our enquiry form takes about a minute to complete and makes no impression on your credit file. What you send goes to our own team, not out to a list of lenders who’ll each chase you. A lending specialist looks at your turnover, your timing and the gap you’re trying to cover, then gives you a call. Use real figures when you fill it in, because accurate numbers are how we get the match right on the first call.
Frequently asked questions
Is a business credit card cheaper than a line of credit?
If you clear the full card balance by each due date, the card can cost little more than its annual fee. If you carry a balance month to month, card interest is usually dearer than a line of credit. The deciding question is whether the money will be paid back within the statement cycle.
Can I pay wages or tax with a business credit card?
Payroll normally goes by bank transfer, so a card won't help directly. Some government and third-party payment services accept cards for tax bills, sometimes with a processing fee, and a cash advance from a card is usually expensive. A line of credit pays cash into your account, which covers both.
What is a line fee?
A line fee is a charge for keeping a credit limit available, often worked out on the full limit rather than the amount used. It means an unused limit still costs you, so size the facility to what you'll realistically draw.
Do the 2026 surcharging changes affect me?
The Reserve Bank's changes removed surcharges on eftpos, Mastercard and Visa debit, prepaid and credit card payments from 1 October 2026. If you pay suppliers by card on those networks, you shouldn't be charged a card surcharge. If you accept cards, you can no longer pass that cost on as a surcharge.
Will a line of credit or a card affect my personal credit file?
Applying for either can be recorded as a commercial credit enquiry on your personal credit report, and directors usually guarantee both. Apply for what you need rather than collecting facilities you won't use.
Can I get a line of credit if my bank refused one?
Often, yes. Non-bank lenders offer unsecured lines sized on turnover and bank statements, and property-secured lines suit larger limits or patchier credit. The terms and repayment rules differ between lenders, so read how each drawdown must be repaid.