| credit automatically available up to a predetermined limit while payments are periodically made. Compare credit line (def. 2). |
| revolving credit n. Credit repeatedly available up to a specified amount as periodic repayments are made. |
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 customers current cash flow needs.
Often referred to as "Revolver."
Investopedia Commentary
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 lent to the customer. Along with the commitment fee there is also interest expenses for corporate borrowers and carry forward charges for consumer accounts.
Related Links
When Companies Borrow Money
See also: Cash Flow, Cost of Carry, Credit, Default, Financing, Line of Credit
Also spelled: revolving line of credit, open end credit, open-end credit
revolving credit
system of retail credit in which the buyer makes periodic payments to an account to which his purchases and service charges have been debited. The service charge is based on the outstanding balance; if the buyer pays his entire balance, no service charge accrues. The total credit allowed the customer may be some multiple of a fixed monthly payment, or there may be no credit limit-the monthly payment varying with the outstanding balance. Revolving-credit plans are provided by many department stores and are an important feature of bank credit-card systems (see credit card).
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