Revolving credit is a type of credit that does not have a fixed number of payments, in contrast to installment credit. It is a line of credit that remains available over time, even if you pay the full balance. Borrowers can access credit up to a certain amount and then have ongoing access to that amount of credit. They can repay the balance in full or make regular payments, and each payment, minus the interest and fees charged, opens the credit again to the account holder. Revolving credit is a particularly flexible financing tool as it may be drawn by a borrower by way of straightforward loans, but it is also possible to incorporate different types of financial accommodation within it.
Examples of revolving credit include credit cards, lines of credit, and home equity lines of credit (HELOCs) . Credit cards are a common source of revolving credit, and when youre approved for a revolving credit account, like a credit card, the lender will set a credit limit. The assigned credit limit is the maximum amount of money that you can charge to the account. When you charge a purchase to your credit card, youll have less revolving credit available at that time.
Revolving credit can be a useful tool to pay for both day-to-day purchases and one-time expenses. A good credit score can help you qualify for more favorable revolving credit terms, such as lower interest rates. However, it is important to use revolving credit responsibly to avoid accumulating too much debt.
