Revolving card

banking

Revolving card is a type of credit card. These are presented as a consumer credit, since they allow the deferral of payments as if it were a line of credit. Consequently, it carries a series of interests.

The revolving card is a type of credit card focused on consumption. It consists of a credit card that is linked to a line of credit. This card allows you to purchase products in the market, allowing financed payment. That is, it allows immediate purchase, allowing payments to be deferred in future months. To do this, the bank charges you a series of previously agreed interests.

The payment is made as if it were a loan. That is, the payments agreed with the bank are paid, together with the interests that have been previously signed.

These types of cards have been highly criticized. The high interest rates offered by this type of card have been considered, at times, usury.

How does the revolving card work?

A revolving card works as if it were an immediate loan. That is to say, in practice, the consumption is carried out as with a conventional credit card. However, the amortization of the credit, the payment, can be made in comfortable installments, subject to pre-set interest rates in the contract. In this sense, we are talking about a bank loan that is consumed through a credit card.

Thus, these cards allow you to pay in two ways. These will depend on what has been agreed with the bank, as well as the client's own interests.

Although they allow you to return the money at the end of the month in its entirety, this format is not the most common. That is, since this type of payment does not usually generate high interest, the bank tends to offer deferred payment. In this way, the client can pay for things more comfortably, while the bank also generates a profit through the interest charged.

The credit offered on this card is focused on consumption. The limits are established in the contract, as well as the return of the borrowed capital. All this is included in the product contract that the bank gives us when we hire it.

Credit availability is monthly. In other words, the established limit is recovered as we return the capital to the entity. That is, to have the credit again, we must previously repay the existing debt. Thus, we are having an extra liquidity fund that we are returning to be able to count on it again.

Finally, these cards are a banking product that is offered as a credit. That is, it is usually offered to people with a good credit rating. In this way, the bank allows its clients to enjoy liquidity, while they generate interest from all these movements.

Types of payments offered by the bank for revolving cards

Regardless of the money available in the account, the revolving card allows the fractional payment of the credit consumed in subsequent months.

Thus, the bank, depending on what we have previously agreed to in the contract with the bank, offers two types of payment for this type of product:

  • Fixed payment: Through this payment, we must pay a fixed fee per month. This, regardless of the expense and the debit balance. The fee is previously set and oscillates in a maximum and minimum range.
  • Percentages: A percentage of the debit balance must be paid on a monthly basis. The percentage is previously agreed with the bank and oscillates, as in the fixed payment, in a range of maximum and minimum percentage.

Difference between credit card and revolving credit card

Although we are talking about two different types of cards, more and more credit cards are being offered as a revolving option. That is, companies increasingly offer the characteristic service of revolving cards in conventional credit cards.

To do this, it is best to know how to identify the differences between conventional credit cards and revolving cards.

Conventional credit cards are a type of credit card offered by the bank. This allows the consumption of goods and services on credit.Amortization is made at the end of the month, having to pay the principal disbursed with the card -loaned by the bank-, as well as interest and expenses associated with its use.

On the other hand, revolving credit cards, like the conventional one, is another type of bank credit card. This allows, like its predecessor, consumption on credit. However, instead of paying at the end of the month and making the amortization, it allows you to postpone the payment in comfortable installments. Its use, as with the conventional credit card, is subject to high interest, as well as possible expenses and management fees.

Thus, we could find its main difference in the repayment of the credit granted by the bank.

Risks of revolving cards

We must be aware that, as with all banking products, this type of product carries a risk associated with its contracting. A risk that is usually linked to the conditions that, if not communicated to the client, generate discomfort and obligations that can generate damages for the client himself.

Thus, we must be aware that these cards carry risks, which we must assume, reading the conditions and the contract. This stipulates all the conditions, allowing us to know what responsibilities and obligations we accept when contracting this product.

Among the associated risks that should be highlighted are:

  • High interest for the use of credit.
  • Confusing and unknown conditions.
  • Complex product that can generate a large debt load.
  • Large commissions for non-payment.
  • High maintenance costs.

Among others, these are the main characteristics that can cause difficulties for the customer. Taking into account all this, having previously agreed everything with the bank, we will be sure that there will be no unforeseen events.

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