revolving credit

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revolving credit

A customer uses a revolving credit account to make a purchase.

Definition

Noun: A type of credit arrangement, typically a consumer credit line, where a financial institution extends a maximum borrowing limit. The borrower can repeatedly use funds up to this limit, repay the borrowed amount, and then borrow again up to the limit without needing to reapply for a new loan. The available credit revolves as the borrower makes payments.

Usage

This term is used in personal finance and banking contexts to describe flexible borrowing facilities. - Primary Use: To describe a pre-approved line of credit with a set limit that is available for ongoing use. - Common Contexts: Discussing credit cards, home equity lines of credit (HELOCs), or personal lines of credit.

Examples
  • Noun:
    • Her credit card offers revolving credit, so she can make purchases, pay the balance, and then have the full credit limit available again.
    • A home equity line of credit is a form of revolving credit secured by your property.
    • Unlike an installment loan, revolving credit does not have a fixed number of payments.
Advanced Usage
  • "Access/Utilize revolving credit": To use an available line of credit.
    • Small businesses often need to access revolving credit to manage cash flow.
  • "Revolving credit facility": A more formal term, often used in commercial banking.
    • The company secured a $2 million revolving credit facility with its bank.
Variants and Related Words
  • Credit Line / Line of Credit (LOC) (n): A general term for any pre-approved credit facility, which can be revolving or non-revolving.
    • He applied for a personal line of credit to cover unexpected expenses.
  • Open-End Credit (n): A synonymous term for revolving credit, emphasizing the open, reusable nature of the agreement.
    • Credit cards are the most common example of open-end credit.
Synonyms
  • Reusable Credit: Emphasizes the ability to borrow, repay, and borrow again.
  • Open-Ended Credit: Highlights that the credit arrangement is not for a single, fixed-term loan.
Related Terms (Not Phrasal Verbs)
  • Credit Limit (n): The maximum amount that can be borrowed under a revolving credit agreement.
    • Her credit limit on the card is $5,000.
  • Available Credit (n): The portion of the credit limit that is currently unused and available for borrowing.
    • After her recent purchase, her available credit decreased.
Key Distinctions
  • Revolving Credit vs. Installment Credit: Revolving credit (e.g., credit cards) has a reusable limit with variable payments. Installment credit (e.g., auto loans, mortgages) involves borrowing a fixed sum and repaying it in fixed, scheduled payments until the debt is fully paid, after which the account is closed.
revolving credit

A customer uses a revolving credit account to make a purchase.

Noun
  1. a consumer credit line that can be used up to a certain limit or paid down at any time

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