What is revolving credit?

• A. An account on which the account holder can charge repeatedly up to a maximum limit.
• B. A loan with a fixed repayment schedule.
• C. A secured loan for real estate.
• D. A one-time loan disbursement that must be repaid in full.

Answer: (A)

Revolving credit is a type of credit where you have access to a line of funds that you can borrow from repeatedly up to a set maximum limit. You can charge or draw against the limit, repay any amount, and then borrow again without applying for a new loan—as long as you stay within the credit limit. Interest is charged on the outstanding balance, and your available credit rises as you repay. This differs from a fixed loan with a predetermined repayment schedule, a secured real estate loan, or a one-time disbursement that must be paid back in full. For example, a credit card lets you borrow up to a limit, repay some, and borrow again, making it a revolving form of credit.