Revolving Credit

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DEFINITION of 'Revolving Credit'

A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customer's current cash flow needs.

Often referred to as "revolver."

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BREAKING DOWN 'Revolving Credit'

Revolving lines of credit can be taken out by both corporations and individuals. The bank that is in agreement with the customer guarantees a maximum amount that can be loaned to the customer. Along with the commitment fee there are also interest expenses for corporate borrowers and carry forward charges for consumer accounts.

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RELATED FAQS
  1. What are some reasons banks deny applications for checking accounts?

    Consumers and businesses use credit to finance major purchases or emergency expenses that exceed regular cash flow. Credit ... Read Full Answer >>
  2. What is the relationship between national interest rates and the amount of revolving ...

    National interest rates and the amount of revolving credit issued have a negative relationship. Interest rates rise due to ... Read Full Answer >>
  3. What are the differences between revolving credit and a line of credit?

    In basic terms, revolving credit is a specific type of line of credit. A line of credit and revolving credit are financial ... Read Full Answer >>
  4. What are some good alternatives to taking out a line of credit?

    There are many different types of lines of credit. The alternatives to investigate depend on what kind of line of credit ... Read Full Answer >>
  5. What's the difference between a secured line of credit and an unsecured line of credit?

    A line of credit is a lending arrangement between a financial institution (usually a bank or credit union) and either a business ... Read Full Answer >>
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    Building a credit score from scratch requires obtaining and maintaining credit. For those who have never had credit cards, ... Read Full Answer >>

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