revolving credit

n.
Credit repeatedly available up to a specified amount as periodic repayments are made.

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 Says:
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.

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1. Line of Credit extended to a business; a credit facility that is good for a stated period of time, but does not have a fixed repayment schedule. The borrower may draw down the line at any time, or repay it in full without penalty. The borrower usually pays a Commitment Fee that secures the line of credit when the application is taken by the lender. Contrast with Evergreen Loan.

2. Credit Card checking account Cash Reserve, or other consumer credit arrangement that gives consumers the option of borrowing against a pre-approved line of credit. There is no charge when the account is not used. When used, the borrower pays a finance charge on outstanding balances, as stated in the credit agreement or credit contract. A finance charge of 1.5% per month, for example, is equal to an Annual Percentage Rate of 18%. A monthly rate of 1.65% equals 19.8% APR. In credit card plans, there are several methods of computing finance charges. The most common is the average daily balance method, in which the interest rate is calculated on the daily average of the previous month. Another is the previous balance method. Revolving check credit plans are written like checks, but draw funds from a bank card account. Check credit and checking account cash reserve advances begin accruing interest payable from the date of the transaction (unlike credit cards, where billing on new charges ordinarily is deferred during a Grace Period of 15 to 25 days) and are payable in the next billing cycle. See also Regulation Z.

Renewable credit line over a prescribed period of time. The term relates generally to an arrangement whereby a banker or merchant extends a certain amount of credit that can be repaid periodically. 297 F. 971, 979. Most states have statutes expressly regulating revolving charge accounts and some states authorize higher service charge rates on these accounts. The courts of other states have ruled that the service charge is interest on a loan and have subjected the credit transactions to usury laws.

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