Revolving Credit


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."


Loading the player...

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.

  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  2. Clean-Up Requirement

    A requirement that is often written into the contracts of annually ...
  3. Default

    1. The failure to promptly pay interest or principal when due. ...
  4. Cost Of Carry

    Costs incurred as a result of an investment position. These costs ...
  5. Credit

    1. A contractual agreement in which a borrower receives something ...
  6. Line Of Credit - LOC

    An arrangement between a financial institution, usually a bank, ...
Related Articles
  1. Credit & Loans

    What's a Revolving Line of Credit?

    A revolving line of credit is an arrangement made between a company or an individual and a bank to borrow money on a short-term basis.
  2. Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  3. Budgeting

    How Much Debt Can You Handle?

    Follow these five steps to manage debt without cutting up your credit cards.
  4. Mutual Funds & ETFs

    Investing In Credit Card Companies

    This investment requires keeping an eye on consumer indexes and the overall health of the economy.
  5. Options & Futures

    Home-Equity Loans: What You Need To Know

    We shed light on why consumers decide to use this form of debt and whether it is a good alternative.
  6. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  7. Credit & Loans

    Expert Tips For Cutting Credit Card Debt

    Managing your debt could mean the difference between spending $45,000 or saving $184,000.
  8. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  9. Credit & Loans

    Home-Equity Choice: Loan or Line of Credit?

    Before using your home as loan collateral, consider both your financing needs and your appetite for uncertainty.
  10. Credit & Loans

    5 Steps To Getting a Home-Equity Loan/Credit Line

    Want to use your residence as collateral for some financing? Our handy how-to guide to getting a home-equity loan or line of credit explains it all.
  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. How do I start building a credit score?

    Building a credit score from scratch requires obtaining and maintaining credit. For those who have never had credit cards, ... Read Full Answer >>
  5. 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 >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!