A Revolving Credit Agreement is a legal contract between a bank and a customer, in which the bank promises to lend the customer money up to specified, maximum amount during a specified period of time. For instance, Bank A promises to extend credit to Customer B pursuant to the Revolving Credit Agreement, thus allowing the customer to access the credit from time to time, subject to a limitation on the outstanding balance of the credit accessed.

A Revolving Credit Agreement may authorize the customer to access the credit extended by either or both of the following: (1) Purchasing goods or services from a seller by means of the bank’s commitment to advance to the seller the payment for the goods and services purchased by the customer; (2) Obtaining an advance of funds by the bank or by another in reliance on the bank’s commitment to pay the funds advanced to the customer.

The agreement must also spell out the terms of the line of credit and what the bank plans to charge. A revolving credit agreement may permit the bank to charge a minimum monthly finance charge of one dollar for any month for which there is an unpaid balance on the customer’s account. Also, the bank must supply to its customer under a Revolving Credit Agreement a statement as of the beginning or end of each period in which there is any unpaid balance on the customer’s account, which period may be a calendar month or other regular period not in excess of thirty-one days.

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