From the course: Introduction to Credit
Revolving credit and its functionality
From the course: Introduction to Credit
Revolving credit and its functionality
- So there are three types of credit. There's revolving credit, ongoing credit and installment loans. Now let's start with revolving credit. Revolving credit is what you would call credit cards. What makes them revolving credit is the fact that after you use a credit card, you can actually just make minimum monthly payments as opposed to paying off the entire thing. So if I've got a credit card with a limit of let's say $1,000, and I spend $1,000 in a month, at the end of the month, I don't have to pay the whole thing off. I can pay maybe 15, 20, 30, you know, $50, sometimes more depending on the interest rates over a month's time. Now I am going to pay more for it, because I'm going to pay interest every month. But that's what revolving credit is. Revolving credit allows you to pay something over time, but you are going to pay more for doing that.
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