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Calculation of Interest on Revolving Debt

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Mark Cappel
UpdatedMay 27, 2024

What is the difference between simple interest and revolving interest charged on a credit card?

What is the difference between simple interest and revolving interest charged on a credit card?

Credit card debt is referred to as "revolving" credit because - unlike a mortgage, for example - it allows the borrower to carry a balance from month to month with no fixed number of payments set to pay off the balance. Additionally, a borrower can continuously add to the debt, up to a set credit limit. All the credit card company typically requires in return is a minimum monthly payment, most of which is just a payment on the interest owed, with as little as 5% or less going towards reducing the principle.

Revolving credit card debt is the source of many individuals' financial difficulties (and profits for credit card companies). Someone who routinely pays only the minimum monthly payment will be making little or no headway towards reducing the balance of their debt and can eventually find themselves with major financial problems.

A good way to avoid this trap is to pay off your credit card balance in full every month. At the very least, pay it down as quickly as possible to keep the accruing interest to minimum.

Creating, and sticking to, a budget can also help to keep you out of trouble. If are looking for a free tool to help you budget, offers a free personal financial guide online at

Best of luck and I hope this information helps you Find. Learn. Save.



Debt statistics

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Housing debt totaled $12.612 trillion and non-housing debt was $4.891 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Collection and delinquency rates vary by state. For example, in Idaho, 14% have student loan debt. Of those holding student loan debt, 6% are in default. Auto/retail loan delinquency rate is 3%.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.



BBill, May, 2009
Marlene, you should check your credit report to see what the status of that account is. If there is a civil suit being filed, you should receive a summons to appear in court from the court where the case is being file. If you have received the summons then it is imperative that you file a reply and appear for the hearing as failure to do so will lead to a default judgment being filed against you which will lead to possible wage garnishments, depending on your state law. If the case has not yet been initiated, then you still have time to negotiate a lower settlement with them. $3000 is a good amount. One other thing that you might want to check before is the Statute of Limitations on that debt account, you can check for your state information here: If the debt is older than the statute of limitations, then you need not pay them anything as, even if they file a court case, the judge will see that the statute has expired and will dismiss the case. Simply put, you need to check the last transaction date as per your credit report and see how long it has been since then. In some states the SOL is for 4 years and in other states it is 10 years.
MMarlene Matthews, May, 2009
I have an outstanding line of credit for $10,700, which I have not paid on since 2002. I received a call stating that there is a civil complaint being filed against me. This was a processing agency who states they can neg with me. I found out that this will fall off my credit report in 12/09. I cant afford more than $3000.00 what else can they do @ this time. I am single mother of 3 children with very limited funds and I have other credit cards debt of $16000.oo which I am paying on now. Is bankruptcy a solution for me. I also have a mort, which I owe more than it is worth.
BBill, Apr, 2009
For the first part of your question, its better if you close some of the accounts that have had no activity for a long time. Closing these accounts with have a slight short term impact, but it will not do much with your score.As for as your husband is concerned, you should be able to see which of the accounts caused this delinquency right on the report. it is better that you get a report directly from the bureaus and not a 3rd party one. You can get a free copy by visiting
MMissia Whaley, Apr, 2009
My credit report indicates that I have too much revolving credit. I have several old cards that I haven't used in years. Should I cancel them or will this hurt my available credit? If I cancel them will this improve my credit score or have no effect. Also, my husband's credit score is lower than mine and his report says, "level of delinquency on accounts." What does this mean? I do not recall ever being late on a card payment. Does it include bill payments by check that had nothing to do with credit cards? The bank made an error to our account once and caused a check to bounce. The bank president sent a letter to the power company to "clear our name." How do I find out what this delinquency is so that I can possibly dispute it. Thank you for your help!