Revolving Credit: what it is and how to calculate

Revolving Credit: what it is and how to calculate

 

Paying only the revolving credit card can lead the consumer to lose financial control. Despite being an important tool, when misused credit card lead a person to bankruptcy. To get out of debt, many people end up choosing revolving credit and paying an amount between the minimum and total bill.

What is revolving credit?

What is revolving credit?

Every time you receive your card statement, you have the option of the minimum payment. This minimum was 15% of the total invoice amount. When you pay between the minimum and the total invoice amount, you are using the revolving credit card. This means that you are taking a kind of loan for the invoice payment in the coming months.

The next invoice will come with the balance payable from the previous invoice plus interest rates. Revolving interest rates are usually the highest in the market, easily exceeding 400% per year! In addition, there were two types of rotary. Anyone who paid any amount between the minimum and the total invoice paid the interest on the regular revolving call. Who paid any amount below the minimum or paid nothing, paid higher interest rates, was the so-called non-regular revolving.

Revolving credit is a practical way to get a loan because it does not require any kind of bank application or contract signature. Just pay an amount equal to or less than the minimum or greater than the minimum and less than the total invoice. With such high interest rates, the snowball effect is created, which can lead to absurd debt that is difficult to repay.

How does credit card revolving work?

How does credit card revolving work?

Every month upon receipt of the invoice with full amount to be paid, which describes all the expenses accumulated by the consumer. Generally, you choose the rotary because you have not managed your accounts well, within the income you receive. Therefore, when there is not enough money to pay the total amount, it is possible to pay the minimum amount, about 15%, maximum 20% of the total.

Even so, getting into revolving credit does not relieve debt and is considered by experts to be a misuse of credit card. Why? Because debt can be swept away by high interest rates and make it increasingly difficult to repay. This is because the following month, the bank or the card company charged the amount that was not paid in the previous month, but added interest, which are not low.

Revolving credit interest, along with overdraft interest is among the highest , so know your requirements well before making a choice.

How to calculate the value of rotary card?

How to calculate the value of rotary card?

In a simple example, released an invoice with the amount of USD 900, with minimum payment of USD 180, minimum amount. By paying the minimum you put USD 720 on revolving credit. The problem is that the next month you will have to pay USD 864, or 96% of the amount of the account, which is not advantageous. The interest on revolving credit has already reached around 500% this year.

Therefore, paying the minimum card amount and entering revolving credit should be your last option. The chances of your debt doubling in a few months is very high. If you are unable to pay off the full amount of the card, contact your bank or service provider to try other more advantageous forms of financing.

A loan may offer you lower interest rates, seeking to negotiate in court, although risky, may be indicated, as long as the lawsuit is being assessed in court, the consumer cannot be considered delinquent, which avoids a major credit barrier.

New rules?

Since April 2017, the revolving credit card has new rules. The consumer can use the credit for only 30 days. Thus, the following month, the consumer must pay the full amount of the invoice, with interest from the revolving, or try to compromise with the institution for refinancing the debt. The new rules provide other forms of installation, changing the misuse of the rotary.

The minimum amount will not be more than 15% of the total invoice amount. Each carrier may set a minimum payout percentage according to each customer’s profile. It also ends the distinction between regular and non-regular rotary. Banks and card operators may only charge the regular revolving fee provided for in the contract. In case of default, fine and interest on late payment may be charged.

The use of revolving credit was limited to only 30 days. If on the following invoice the customer is unable to make the full payment, the bank must provide a lower interest line for debt repayment. The goal is to force people to settle credit card pending rather than increasing debt value by using higher interest credit lines.

Remember that the fine will be 2% (charged only once) and default interest will be 1% per month (maximum). Remember that there are several fees and charges charged by the bank for lending, only referring to the Total Effective Cost (CET).

The best option is to make an effort and pay off the full invoice amount without using the bank’s revolving credit or other lines of credit. So spend wisely!

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