Have you heard of revolving credit? Yes, very likely. But do you know what it means? It is essential to understand what it is like to get away from high fees and keep your financial health up to date.
What is revolving credit and how does it work?
Revolving credit is nothing more than the minimum amount of the credit card bill that the bank makes available in cases where the consumer does not have the full amount to pay it but still needs to continue using the card.
To better illustrate, revolving credit is a form of emergency loan, much like overdraft, however, it is important to remember that it is very expensive.
Despite the high value, the bank makes an analysis to know the payment terms of the customer. Generally, it can only be used once a month, but offers the consumer the option to pay the full amount or in installments when they prefer.
Revolving credit lowers the total amount as it is spent and increases with the payment of the amount used. To recover it you must pay interest, taxes and charges for the time you used it.
Why is revolving credit dangerous?
When it comes to revolving credit, it is crucial to know that this is not a viable option as the interest rate is very high and can double the value of your debt. You may not know, but this interest rate can reach 300% per year.
So be sure to have discipline and make good use of your card.
New revolving credit rule
In 2018 the revolving credit rules changed. Interest charges are now limited to 30 days for those who do not pay the minimum invoice amount. After this period, the consumer may pay the entire debt or the bank will be required to pay the amount with an interest rate lower than the revolving credit.
With this change in the minimum invoice amount, banks have more freedom to set another amount to lower the default rate, or even end the conditions of this rate.
Another interesting point about the CMN approved standard is that now customers who are unable to pay the minimum amount will no longer have to bear the special interest rate, higher than the revolving credit card, which today is around 397%. per year, but default interest of 1% and fine of 2% per month.