Revolving credit cards. How are they marketed?

16/10/2020

First of all, it should be noted that “revolving” refers to a form of credit, rather than to a type of card. Having said this, most banks market revolving credit to individuals through credit cards, whether physical or virtual.

This type of credit allows you to defer payments in the form of fixed instalments or as a percentage of the drawn credit or balance. The credit limit is replenished as the principal is paid off. In short, it is just another financial product. But if you are not familiar with how it works, you could use it inappropriately and run into problems.

This product is generally offered to customers in the form of a credit card or under a trade name. In many cases, it is marketed with no mention of the word “revolving” and sometimes without properly explaining the characteristics of the type of credit involved. It can also be offered jointly with large retailers or intermediaries, using their brand name.

You must also bear in mind that, although some cards operate exclusively as revolving credit, others allow for various payment methods. Cards that give you interest-free credit until the end of the month by default but can operate as revolving credit cards under certain circumstances are very common.

For these reasons, it is important that you talk to your bank or visit its website (or that of the intermediary) to find out about the card's features before you use it.

You should pay special attention to:

• its payment terms, and whether it is issued with a predetermined payment method or you can choose between several options before signing the contract;
• whether you can change the payment method or the chosen instalments once you have the card, and, if so, how;
• the interest rate and APR applicable to the deferred payment option.

These credit card features are considered “particularly relevant” and must be highlighted in the mandatory pre-contractual information that the bank or intermediary must give you before you sign the contract.

Don’t forget that, sometimes, when you have a card with pre-approved credit, you may get phone calls from salespeople to encourage you to take out this credit in one go, by transferring the money to your account for you to spend it any way you choose. Consider carefully whether you really need it, whether the terms and conditions are satisfactory and whether this involves activating the revolving feature. Don’t forget to ask about the APR, and don’t feel pressured to decide on the spot.

Our next post will explain in detail what pre-contractual information you must be provided with before signing the card contract.