Revolving Credit.
In plain English
Revolving credit gives you a set limit you can borrow against again and again: you spend, repay, and the room frees up to borrow once more. Credit cards and HELOCs are the common examples. You owe interest only on the balance you carry, and there is no fixed end date as long as you make at least the minimum payment. That flexibility is useful, but carrying a balance on high-rate revolving credit like a card is one of the most expensive ways to borrow.
01Why it matters
Revolving credit is flexible but its high rates make a carried balance costly, and how much of your limit you use also affects your credit score.
02The math, step by step
You have a 5,000 dollar credit card limit, spend 1,000, and pay back 400. You now owe 600 and can still borrow up to 4,400, with interest charged on the 600 you carry.
03What this is NOT
Revolving credit is NOT an installment loan. An installment loan is a fixed amount repaid in set payments until it is gone; revolving credit is a reusable limit with no fixed payoff date.