What is a revolver?

Definition and Examples of a Revolver

A revolver is a credit account holder who has a revolving credit product such as a credit card and does not pay the full balance due each month. Instead, the revolver may make the minimum required payment to the creditor. This practice means that revolvers typically pay interest on the charges that are carried over to the next month.

How a Revolver Works

You may be a revolver for financial reasons if you lack an emergency fund or other savings and need to spread charges over several months for large expenses. For example, carrying a balance can help manage an unexpected medical expense or car repair by providing more manageable installments that fit your budget. On the other hand, you may choose to let your balance roll over to the next month if you are taking advantage of a promotion on your credit limits that allows you to make a large purchase and avoid interest for several months. In other cases, you may be a revolver if you are simply spending more than you can afford, which can lead to deeper debt.

Revolver vs. Payer

The opposite type of credit account holder to a revolver is called a payer. You are a payer when you do not allow any balance to carry over each month and instead pay the full amount. This strategy can help you avoid interest charges since credit cards typically come with a grace period. When you pay off the statement balance before the due date, the grace period allows you to avoid the interest that would apply if you let some of the balance roll over.

Key Takeaways

A revolver is a borrower who will let the credit balance carry over to the next month instead of paying it off in full when due. Creditors usually charge interest and apply it to the balance that the revolver carries on the card. Being a revolver can be financially detrimental and affect your credit score. You may have difficulty obtaining other credit products and securing competitive interest rates in the future. In contrast, when you do not let the balance roll over from month to month, creditors view you as less risky and your credit rating can benefit.

Source: https://www.thebalancemoney.com/what-is-a-revolver-5211848