What Is a Revolving Credit Balance?

You may hear bankers and others with a taste for finance speaking about revolving credit balances. Both businesses and consumers can have revolving credit extended to them by a bank or other lender. In short, revolving debt is a fixed amount of money that does not have to be repaid every month. As of March 2010, there was $852.6 billion in revolving debt in the United States, the majority of which is credit card debt.

Types

The majority of revolving credit comes from loans extended to consumers through credit cards. Your revolving credit balance is the total amount outstanding on each of your credit cards. Unlike a home mortgage or other loan, a revolving credit does not need to be paid off in a specified period of time. Revolving credit can be drawn down at any time, but typically has a limit that is based on a person's credit score and ability to pay off the debt.

Interest and Fees

While revolving credit does not need to paid off by a certain time, it can accrue interest on a monthly basis and be subject to fees if not paid off in full every month. The interest rate and fees can often be changed by the bank that issues the credit card.

Failure to Pay Your Balance

Revolving credit is typically unsecured debt, meaning the bank that extends you a loan through a credit card does not have a claim on your house or personal property if the card goes unpaid. Therefore, the bank cannot repossess your property if you fail to pay off the loan over time.

Implications for Credit Score

Your combined revolving credit balance has a significant impact on your credit score. Unpaid balances can negatively affect your score and your ability to obtain credit cards in the future. Conversely, demonstrating that you can pay off your credit card balance every month can greatly increase your credit score and make it easier to obtain loans in the future. The total amount of revolving credit that you are able to borrow (the total maximum available on all of your credit cards) can also affect your credit score depending on how may cards you currently have.

Obtaining Revolving Credit

Obtaining a revolving line of credit typically requires you to fill out an application with a credit card company, bank or other financial institution. The size of your credit limit is determined by your credit report and credit score. Some people with higher credit score can be "pre-approved" for revolving credit, which enables you be approved for credit quicker.