The revolving card is one of the main types of credit cards. It falls into the category of rechargeable cards and has the same functionality as the traditional balance credit card; unlike this, however, it does not provide for the debit to the account of all expenses with a single solution at the end of the month.
On the contrary, it allows you to make purchases independently of the funds available in your current account, to then repay your debt to the financial institution in constant monthly installments.
How does it work?
The revolving card can therefore be used for all in-store purchases, online shopping and cash withdrawals: it allows you to make transactions up to the maximum amount made available by the creditor (credit line).
The repayments of these transactions provide for a constant minimum installment, the amount of which can possibly be increased at the discretion of the owner, who can also choose to pay the entire debt.
This type of financing is much more accessible than normal loans and loans as it requires less guarantees from the customer.
On the other hand, however, revolving cards often hide numerous disadvantages, mainly related to high interests.
For the third quarter of 2018, the Bank of Italy recognizes for the revolving cards an annual average effective rate (taeg) of 16.15%, With a usury threshold rate (i.e. the rate beyond which the offense) of 24.15%, the highest ever compared to all other types of financing.
How many times have you received revolving card deals via email in recent years, perhaps sent directly to your home, after you were denied a personal loan? No wonder! Because between a personal loan (average rate of 10%) and a revolving card there are at least six points of rate difference!
The continued availability of money often pushes customers to over-indebt, no longer able to sustain late payment interest and overdraft fees. In a period marked by the decrease in loans to individuals and families, the use of revolving cards is constantly increasing, even among the youngest.
However, it is good to pay close attention to the contracts that you enter into with your bank, investigating in depth the constraints and costs that these loans entail.
It is also worth mentioning the golden rule regarding expenses: always take the step (i.e. the purchase) proportionate to your leg (i.e. your income).