A:

There are many benefits to having revolving credit. Much more convenient and secure than cash, your credit card can be there when you need it, even through unexpected expenses. In order to fund your next vacation or to pay off higher-interest debt, all it takes is a swipe of your card rather than taking out an loan. Revolving credit is great for those who are able to cover their purchases. People who have steady jobs with irregular pay checks, such as individuals in sales positions, generally benefit most from revolving credit.

However, there are obvious drawbacks with such financial flexibility. Many card holders put off paying back their debts, especially when there are no fixed payments, but they forget that compound interest adds up quickly. Plus, the higher the balance, the more interest is expected to be paid, which is why it is important to pay off balances in a reasonable amount of time. Because of this, credit scores only suffer if bills go into default. If you make purchases that you know you can cover and make regular payments, then your credit score should not suffer for having revolving credit.

When choosing a credit card that is right for you, a low annual percentage rate APR plan is best when planning on having revolving credit to avoid a suffering credit score. Additionally, be sure to check the fine print when applying for a card, as lenders may be able to change your credit limit and interest rate at their discretion. Typically, these changes depend on your credit score, which is affected by how quickly and diligently you pay back your debts.

Revolving credit is not only convenient; it can also help to raise credit scores and provide credibility for lenders, when used responsibly. Strict budgeting is required on the part of the borrower and can negatively affect the user's credit score when recklessly used. However, without revolving credit, card holders are limited when applying for any kind of loan, as lenders are unsure of repayment habits. This type of applicant makes for too much of a risk. Effectively managing debt demonstrates your credibility and creditworthiness that lenders require from potential candidates for additional credit cards or loans.

Interest payments from those who carry revolving credit card balances from month to month are the main source of revenue for credit card companies. However, it is much more of a risk for them to take on someone who neglects his or her accounts, as lenders don't make any money when accounts go into default. The key is to make payments regularly, while retaining a sizable balance. Those who adhere to this financial law are likely to be rewarded with higher credit limits to encourage more spending from responsible borrowers.

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