15 Jan 2015

A credit card consumer who carries a balance from month to month. A revolver is a major source of income for a credit card issuer. This is because s/he only makes the minimum payment required monthly, hence, paying interest on the remaining balance. A revolver never fully repays what s/he borrowed, or will take months or years to do so.

The term “revolver” comes from “revolving credit,” which is the category that credit card borrowing belongs to. Revolving credit means that if you have a $5,000 credit card limit, spend $1,000, then repay it, you can then borrow that $1,000 again. Other types of loans don’t permit this reborrowing.

A revolver might spend $1,000, then repay $200 and carry an $800 balance plus interest; spend another $1,000 and repay $300, carrying a $1,500 balance plus interest; and so on until the revolver decides to get out of debt or quits paying altogether and goes into default. Revolvers make up a considerable percentage of credit card consumers; consumers carried $880 billion in revolving debt as of August 2014, and the average card that carried a balance from month to month had a balance of $8,220.

The opposite of a revolver is a transactor, a consumer who uses a credit card to make purchases but pays the balance in full and on time each month. While credit card companies still make money from these consumers because of the interchange fees merchants pay on each credit card transaction, they don’t earn any interest or late fees from these consumers, making them less profitable.

One method credit card companies use to attract revolvers is the 0% introductory APR balance transfer offer. These offers encourage consumers to transfer a high-interest balance to a new card that charges no interest during the promotional period, commonly 12 months. The 0% rate stays in effect as long as the customer makes each minimum monthly payment on time, until the promotional period is up. The credit card issuer hopes that at the end of the promotional period, the consumer will still be carrying a balance and will become another profitable revolver who pays interest each month.

Revolvers aren’t always a good source of profit, however. A customer who carries a balance may eventually stop making payments altogether, and the creditor may have to charge off the unpaid balance. In such cases, the issuer might recoup pennies on the dollar by selling the unpaid balance to a debt collector, who can then attempt to make a profit by collecting the balance from the delinquent customer.

Covid-19 – Johns Hopkins University

Download brochure

Introduction brochure

What we do, case studies and profiles of some of our amazing team.