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."

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 >>
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    National interest rates and the amount of revolving credit issued have a negative relationship. Interest rates rise due to ... Read Full Answer >>
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