Definition
A revolving account is a type of open-end credit account where a consumer may borrow up to the total amount of available credit.
Analysis
Revolving accounts include major credit card accounts, store cards and even lines of credit. As a consumer makes purchases or cash advances, the balance will increase and the available credit will likewise decrease. Payments to the account will restore the available credit by an equal amount.
Revolving accounts allow for a consumer to access their available credit for short-term credit needs, and to increase their purchasing power by paying off all or a portion of the existing balance. Details of their revolving account history are normally reported to credit bureaus on a monthly basis.
A credit card will normally charge one rate of interest for purchases, another rate for special balance transfers and an additional higher rate for cash advances. A line of credit on the other hand will charge just one rate on all withdrawals.
