Beware of revolving credits
In a matter of quick credits and credit cards, the catalog is overwhelming. This time we look at a controversial product that is offered in the form of a card and whose characteristics offer interesting advantages and disadvantages that must be taken into account. They are the credits or revolving cards .
What is a revolving credit or card?
It is said that a credit or a card is revolving if it is revolving. This means that the amount of money available increases and decreases respectively as the holder makes purchases and pays expenses. One of the conditions is that a credit limit is established, but not a limit of operations. The cardholder customer has a period of time -generally one month- to reach the maximum limit set by the financial institution. Once that period has elapsed, you can make a payment with which to reestablish said credit, without having to reestablish it up to the limit.
For example. If a revolving card has a credit of 1500 euros per month and the customer consumes 500 during the 30 days, the following month the limit is set at 1000 euros and the debit is 500 plus interest for the amount spent. The customer has the opportunity to pay a minimum or pay the total spent to restore the maximum credit.
Advantages of revolving cards or credits
Basically an advantage is offered as the most striking of this type of revolving cards compared to traditional cards. With this system the client has a limit and what he consumes can be returned through fixed monthly installments or through percentages of what he consumed. You do not have to reset the counter every time a month is consumed, but there is great flexibility - not without drawbacks.
Disadvantages of the revolving system
It could be said that the revolving credit system may be interesting for some clients. However, others find it more advantageous to apply for a mini-loan or quick credit.
In the list of "cons" of credits and revolving cards, it should be noted that there is a danger in the convenience of repaying credit. Although it is possible to set a small monthly payment to pay off the debt or choose the option of a percentage of the debt, it is obvious that the part will be less than the whole. In other words, if what is paid is a part of the debt, the interests of what remains are ignored with those of the following month until the debt is difficult to assume in many cases.
On some occasion, the case of people whose monthly payment was less than the interest generated has been pointed out, so that the debt at the end of the year charged a capital nature. To which are added annual interests that are higher than those of a loan, with APR rates of 20 or 30%. In this regard, the judicial authorities have ruled with a resounding ruling issued by the Supreme Court in 2015 regarding revolving credits and cards.
The Supreme Court and revolving credits
In 2001, a Catalan citizen signed a contract with the banking entity Sygma Hispania by which a consumer loan was granted under the revolving credit model. According to the agreement, the client had a monthly limit of 3000 euros for the expenses that he considered appropriate. The money was available at the request of the user by credit card or telephone call.
The bank established an APR interest of 24.6% in the contract, to which it would have to add 4.5% for late payment interest.
In total, the client had 25,634 euros during the duration of the contract, generating interest of 18,568 euros , of which he paid a third.
In a first instance and in a second review by the individual courts of Cerdanyola del Vallés and Audiencia de Dornsife, the bank was agreed. However, the appeal reached the Supreme Court , who issued a final judgment in favor of the client based on the Usury Repression Law (1908), which establishes as a “usurer” that credit whose interest rate significantly exceeds the national average. . Thus, the interest imposed was interpreted as excessive, but not the revolving credit modality.
Ultimately, one might wonder if the decision to opt for a revolving credit was the right one or a credit in CréditoSí would have been preferable in which the client knows from before hiring it how much and when to pay for the credit. Also, once you are already a client of ours, you can make your request much easier and receive the money in just 10 minutes.
The sentence can be consulted on the website of the General Council of the Judiciary .