Revolving Credit: What It Is, How It Works, New Rules and Tips
The Revolving Facility is an alternative to credit card users for emergency situations, where there is the need to pay a smaller amount to the total bill.
It is something more common than one imagines and, unfortunately, there is a great ignorance on the subject, which causes a financial descontrole, and can even generate a negative of credit to the debtor.
If this has already happened to you, then know that it is important to know this option and understand what the new rules of the credit card are, because it is a loan, to which they interest on.
Keep reading the following text to clear your doubts and avoid financial complications.
What is Revolving Credit?
To simplify, we will take as an example the most common situation of use: when the minimum payment of the invoice is made, corresponding to 15% of the total value. The difference between the amount paid and the total value of the invoice is the Revolving Credit .
This system has the usage values updated according to the use of the contractor, that is, the values decrease as they are used, but can also increase when the applicant makes the payment of the amounts already used.
In a more specific way, this line of credit is granted by the banking institution to its clients .
The interested party forwards the appropriate documentation to the bank to analyze and approve the availability of the securities.
This release happens almost automatically, at a time when the customer has an unavailable balance in his checking account.
The interest rates will only apply to the amount used , as well as all taxes and charges resulting from these transactions.
Where did the Revolving Credit arise? Story
The use of the Revolving Credit began in 1930 , during the period known as The Great Depression, which resulted from the crisis of 1929.
In that period, with the economic crisis that was established in the United States, the unemployment rate was high and the gross domestic product (GDP) fell in several countries, significantly affecting the economy of the twentieth century.
As passed the Second World War, in the period from 1939 to 1945, the US government began to generate credit payments with the possibility of extended deadlines and offer the possibility of loans for repayment of values.
The loans, which were previously commercial, went through a period of scarcity, lowering bank demand and causing banks to seek new alternatives to generate their economy.
In this way, credit emerged as a way of transforming the commercial economy through installments and extended payments by its debtors.
How does the Revolving Credit work? Main features
The credit card company provides a preliminary analysis of the applicant’s financial condition in order to verify the ability to meet the payment of the limit to be offered.
Since April 2017, pursuant to Resolution 4,549 of the Central Bank of Brazil, the revolving credit can only be used for 30 consecutive days .
If it is necessary to use the credit for a longer period, the bank should be contacted for a new financing or installment option.
This installment should be an advantageous alternative for the debt to be withdrawn. There is no standard definition of the interest rate or maximum number of installments , as each institution can establish its rules according to the profile of its clients.
With the approval of the credit and the determined amounts, the customer taking the service may choose to withdraw the money in the total amount of the bank or use as needed.
As the borrower uses the amount released by the institution, the incidence of bank charges will be increased, but only the amount used. As the customer is paying the service provided by the bank, the credit value tends to increase.
What is the Revolving Credit?
As seen earlier, this line of credit has the function of assisting in the fulfillment of the payment of the credit card invoice through the release of an emergency loan.
Before the rule of 2017, it was common for many people to pay the bill minimum for consecutive months, accumulating interest and compromising the family budget.
In this situation, there was also the denial of the CPF in credit protection services, making future purchases impossible .
The purpose of this rule was to avoid over-indebtedness and reduce interest paid by applicants. After 30 days of use of the Revolving Credit, the invoice must be paid in full or a new loan must be requested.
Do you need a loan? Know your chances. Check your CPF and Score at Bom Pra Crédito .
How are interest collected on the Revolving Credit?
Previously, we made an article on the functioning of the Revolving Interest .
Each credit card operator has a percentage of interest that is practiced. This fee is indicated on the invoice and, first, on the contract. With the value in hand, making the calculation is simple and avoids inconvenience .
Let’s take as an example some Revolving Credit rates from different credit card companies.
The Santander Revolving Credit has an interest rate of 11.38% per month , on average.
If the debit was in the amount of R $ 500.00, will be paid R $ 500.00 + R $ 56.90 in the next invoice, outside the expenses of the current month. It is important to note that this interest rate is customized according to the credit analysis performed by the card operator , which may be higher or lower than the average.
Other examples: in Nubank, the interest rate of the Revolving Credit is in the amount of 14.00% per month ; in Senff Financeira, the average is higher, they are 15.58% per month.
The settlement of the amounts of this credit with the banking institution may occur in installments or in full.
The way in which the customer is going to make the payment of this credit corresponds to each agency. The payment system is agreed at the time of hiring the service.
New rules for the Revolving Credit on the card
The application of the Revolving Credit has increased the consumption conditions of customers who opt for this form of payment.
However, with the growing indebtedness of its customers and the payment of the minimum amount of the invoice becoming a habit, new rules were established , in order to control the default of the borrower.
Since April 3, 2017, according to Resolution 4,549, of the Central Bank of Brazil, the Revolving Credit can only be used for 30 consecutive days.
In this way, in the next 30 days, the customer must pay the invoice in full or consult an installment option with the bank .
The installment interest, according to the Resolution, must be lower than the current interest of the credit card.
It is important to note that the best option will always be to not resort to the Revolving Credit and regulate the expenses with credit card , which should not exceed the monthly earnings but rather correspond to a parcel.
Credit Card Spending Hazards – Super Indebtedness
The use of the Revolving Credit is a system that contributes very significantly to the movement of the economy of the country , since it mitigates the effect of the debt and provides more time for the discharge of the debt, reducing the negative effects on the purchasing power of the user .
However, financial managers advise all clients seeking this alternative to pay attention to their real needs.
Once hired, the Revolving Credit presents interest, fees and charges that can weigh on a unconscious and unruly budget.
The “snowball” effect can disrupt the client’s financial life, which should fully pay off the debt in the subsequent month, in addition to the charges for that month.
The new rule, read in the previous item, was a way to avoid the over-indebtedness of the Brazilian families, who accumulated, month by month, the rotational interest due to constant payments of the card minimum.
Any financial dislocation should be analyzed with caution, since the indebtedness will undermine future credit analysis and availability of values , as well as complications to the client’s budget routine.
For a positive monthly financial planning, some organizations in relation to their spending should be considered.
The use of credit card significantly extends the conditions for the payment of your accounts and the possibility of making new purchases.
However, it is necessary to understand the clauses present in the adhesion of these services, as well as to monitor the updating of the amounts that will be charged by the institution in the invoices generated.
These values can be easily verified on the bank’s website.
In addition to its own financial control, the financial institution manager may be sought to assist in the search for viable alternatives to emergency credit situations.
Tips for Managing Revolving Credit
Some tips can be followed to avoid indebtedness and even emergency use of the Revolving Credit. See below:
- Be responsible with the credit card : avoid the accumulation of installments and keep in mind the total amount that can be spent monthly with this payment option. Many people think of credit card as a value beyond their earnings, which is not true. It is just a way to increase purchasing power and have the opportunity to pay for high-value goods and services.
- Avoid delaying your invoice payment and making payments lower than the total invoice amount.
- Understand what you are hiring : many avoid paying attention to the myriad rules of contracted services, but as far as money is concerned, these rules must be learned and understood. Be aware of the personalized interest rate of your credit card’s Revolving Credit and the available installment options from the moment you contract the service.
- Need the Revolving Credit? Do not freak out. Calculate how much you will pay next month and control your spending so that you can fully pay off the debt.
- If it is not possible to pay off the Revolving Credit used, contact the financial institution and check the installment options. Remember that the installment payment will be added to the monthly expenses. It is important to have control.
- Consider using a prepaid card: since you can not spend beyond the available balance, financial control is greater and more secure.
- Track your spending: Banking applications provide financial information in a practical way. Get into the habit of checking your spending and controlling your budget so you can pay off debts and access goods and services in a simplified way.
How to clear the invoice from the card and avoid the Revolving Credit?
If the use of Revolving Credit was unavoidable and it will not be possible to pay off your debt, personal loan can be a viable alternative.
Calculate how much you need and let Good Credit seek the best personal loan proposals for you at the best rates and conditions.
With debt paid, you have the opportunity to reorganize your financial life without stress and, best, with the lesson learned.
It is still possible to hire the personal loan to pay the bill before even using the Revolving Credit.
You may have access to lower rates than revolving credit card interest and have a more user-friendly installment in your pocket. Bom Pra Crédito is on hand to provide the best option.
Frequently Asked Questions about Revolving Credit
It is normal to raise doubts about the Revolving Credit , after all, not all people with access to a good financial education.
This emergency credit option has its main use related to the credit card, but also has other functions such as collateral in duplicates and overdraft , an old acquaintance of several Brazilians.
We will specifically address the use of Revolving Credit on your credit card bill payment. See the following items:
What does credit card mean on the press?
If you did not pay your bill in full and only paid a minimum or a figure above it, you are using the Revolving Credit .
This means that on the next invoice you will have to pay the unpaid difference plus the revolving interest rate, which will vary according to the bank and also the credit analysis according to your consumption profile and default.
Revolving Credit is an emergency loan granted by the financial institution in order to allow full payment of the invoice to be postponed within 30 days, providing time for the user to obtain that money.
What is the charge on the rotary?
In case of use of the Revolving Credit there are charges on the use of this service, just like any other standard loan.
If your invoice payment does not match your total amount, you will pay revolving interest on that difference. Let’s look at the example:
- Amount of invoice: R $ 1,000.00
- Minimum payment amount (15% of total): R $ 150,00
- Payment made: R $ 300,00
- Value of the Revolving Credit used: R $ 700 + fees
- Amount to be paid in the following month: R $ 700.00 + revolving interest rates on top of the amount borrowed + expenses incurred in the month
In order for institutions to be able to work with a Revolving Credit system, they establish specific clauses used in the credit line opening contracts that will enable the client to enter into a mutual category agreement.
The contracts in this model comprise the lender as the institution that is presenting the contract, and the borrower, who is the borrower of the loan.
The credit card can be a benefit to your server, provided it is used wisely. The installment of high value purchases helps those who do not have the credit at the time of purchase, giving the opportunity to purchase the goods in a simplified way.
Responsibility for using any line of credit is important for financial control and preventing complications in future purchases.
If possible, prefer cash, cash or debit payments. You can inquire in our article about the advantages and disadvantages of paying a credit card account .
The use of the Revolving Credit should not become a habit, since the accumulation of interest can have the effect “snowball”, implying in a debt much greater than the initial one.
Check the options that your financial institution offers for discharge of debts and regularize the debt of the Revolving Credit as soon as possible.
If there are no financial conditions to pay off the debt, a personal loan may be necessary. Count on Good Credit !
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