A revolving credit arrangement is characterized by what feature?

• A. A fixed-term loan with a single repayment
• B. A line of credit that can be used repeatedly up to a limit
• C. A charge card with no credit limit
• D. A savings-backed loan

Answer: (C)

Revolving credit is a flexible line of credit you can draw from repeatedly up to a set limit, and you can carry a balance from one billing period to the next as you repay. The key idea is that funds become available again after you repay, so you don’t need a new loan each time you need money. This is what makes it “revolving”—credit can be used, repaid, and used again without reapplying.

A fixed-term loan is different because you borrow a lump sum (or in installments) once and repay it over a set period; you don’t continuously borrow from the same facility. A charge card with no preset spending limit isn’t revolving credit either—these typically require payment in full each cycle and don’t offer a revolving balance to carry with interest. A savings-backed loan uses your own savings as collateral and isn’t the same ongoing, reusable line of credit.