Revolving Card: if you know it, avoid it

Would you be willing to pay 16% interest on a loan of less than 10,000 euros?

This is what happens with the revolving card , a particular type of credit card that is used with increasing frequency because of its ease of use: ease, however, is paid at a very high price, since this financial instrument has numerous disadvantages.

But what exactly is the revolving card ?

It is a tool issued by a bank (or another credit institution), which allows the payment of purchases made with the card to be paid in installments , regardless of the availability of money in the bank account . The procedure is similar to that of traditional personal loans, because the owner of the card must pay interest on the installments.

At first glance, the revolving card could seem an easy and convenient solution, requiring less guarantees from the customer and therefore being more accessible It is not by chance that it is having success especially among young people.

Behind this facade, however, the revolving card hides more than one dark spot. Let’s see the main ones:

The percentages of interest that must be paid on the amounts financed are high, very high.

The Bank of Italy data for the April-June 2017 quarter reveal, for revolving cards, an average effective annual rate on an annual basis (APR) of 16.30% for loans of up to 10,000 euro, with a threshold rate of 24 , 3% (the rate over which the usury starts): impressive numbers, the highest of all the other types of financing. Instead, we remember that the average rate of personal loans is 10.3%, with a threshold rate of 16.9%.

The amount financed below the credit line must be maintained.

It is true that the revolving card works independently of the availability of money from the bank account, but the amounts must not exceed the maximum limit of exposure to the bank (credit), otherwise the client will find himself having to pay an additional cost equal to the maximum commission discovered .
The continuous availability of money often pushes customers to lose control of the situation and over-indebtedness, making it difficult to support the default interest (those that take over when an installment is skipped) and the overdraft fees.

The revolving card is far from providing subsidized and convenient financing: the mechanism that regulates this instrument risks crushing its user, with decidedly high interest rates.
By requesting a loan, on the other hand, you will be able to benefit from loans with the most advantageous interest rates. Discover immediately the models of ethical finance between individuals.