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Revolving Credit

Definition

Credit you can use repeatedly as you pay it off. Credit cards are revolving — you can charge, pay, then charge again using the same credit line. Opposite of installment credit (car loans, mortgages) that you pay down to zero.

Why It Matters

Revolving credit is useful for flexibility but dangerous for overspending. It's easy to keep a balance and pay high interest. Credit utilization (how much you're using) heavily impacts credit scores.

Example

Credit card $10,000 limit. Month 1: charge $3,000, pay $2,000, owe $1,000. Month 2: charge $2,000, owe $3,000. Month 3: charge $4,000, owe $7,000. You can keep revolving as long as you don't exceed $10,000 limit.

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Related Terms

Credit Utilization RatioCredit ScoreGrace PeriodMinimum Payment
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