What Is the Difference Between a Credit Card and Revolving Credit?

There are many types of consumer loans in the United States. One of the most common is the credit card. Credit card payments are calculated monthly based on outstanding balances. This type of credit is called revolving credit. Installment loans, on the other hand, are pre-calculated--the standard payment never changes. There are, however, some differences between revolving credit on credit cards and revolving credit on other loans.

Identification

A revolving line of credit can adjust dramatically. For example, if a credit card has a $5,000 credit limit but only a $100 balance, the payment required will be quite low. However, if that card is maxed out, the payment will likely be quite high. Credit card companies adjust payments each month by calculating the amount of interest based on the outstanding balance.

Credit Card Rates

Credit card rates are often variable or adjustable. In response to the 2008 credit crisis, credit card lenders cut back on offering fixed-rate credit cards in an attempt to remain profitable. Rates change most often when borrowers fail to make payments on time. The rates sometimes can be changed arbitrarily. Usury laws differ from state to state, but some states (like Delaware) have extremely loose usury regulation. Many credit card companies set up their headquarters in these states to take advantage of lax regulation.

Revolving Credit Rates

Not just credit cards are revolving. Personal lines of credit and even mortgages can be revolving accounts, too. However, these programs are often more beneficial to the customer. Revolving mortgages, for example, usually have fixed rates. Customers still only need to make minimum payments, but need not worry about their rates skyrocketing.

Additional Fees

Credit cards are known to have ample fees. Annual fees, processing fees, late fees and over-limit fees are all somewhat common. Customers who struggle with their credit card payments often find their balances remaining stagnant because of extra fees--especially if only monthly payments are made.

Similarities

All revolving lines of credit offer consumers the ability to re-access a credit line. This can be flexible. Revolving mortgages, especially, are helpful for consumers doing home repairs. Customers can take advances for supplies and labor, pay back the advance and re-borrow against the line if needed.