What is a Revolving Credit Limit?
A revolving credit limit is a line of credit open to the limit agreed upon that you can borrow. This is common in two types of loans, those of credit cards and in certain home equity loans. Although you may have a maximum limit of credit available to you, this may be called a revolving credit limit or simply revolving credit, because paying back anything you borrow leaves you continual access to credit. Most credit cards work on the principle of the revolving credit limit. You have a set limit of credit. As long as you make payments, or pay back whatever you owe, you continue to have access to the credit up to its limit. This is a revolving credit limit because your access to borrowing money hinges on your paying back what you owe, thus credit limits will change. Say for example you have a credit card of the revolving credit limit type. You can borrow up to a maximum of 1000 US dollars (USD) on the card. You have spent 500 USD already. Your credit limit, the amount you can currently bo
Let’s say that your card has a $400 credit limit. Therefore, at any given time you can charge goods and services up to $400. Again, let’s say that you purchase an item for $75. Now your current credit available is $325 ($400 – $75). Once you remit payment for the $75 charge (either from your FSA or from your personal checking account), your credit limit is restored to its original $400.
