Like a lot of account types revolving credit by itself is neither good nor bad but by using it to its full potential it becomes a really powerful tool.

Who is it best for?

  • Self-employed people who have “lumpy” incomes and outgoings benefit by being able to deposit at any time to any level without penalty. They can also withdraw back up to the limit without having to go through the process of applying for more through the Bank.
  • Salaried people who receive bonuses or commissions can also benefit by using this type of account in the same way.
  • High earning people who don’t want to limit themselves to only paying what the fixed rate portion of their lending dictates. They can also deposit extra into this account each pay without penalty.

A Revolving Credit account provides a great way for those that have savings and who have always kept these savings separate from their mortgage as an “emergency” fund. With a standard mortgage, when you pay money into the account you can’t get it back out but with the Revolving Credit account you keep the limit so any money you deposit is always available.

As an example if you have $20,000 set aside as an emergency fund in a savings account you might be earning 2% on amount (and paying withholding tax on this) where depositing it into the Revolving Credit account will save you over 6% net (the interest rate on the account).

The key to saving with this type of account is to leave any deposits in there for as long as possible. As soon as you deposit funds in the account you are only paying interest on the outstanding balance remaining.

To take this to its fullest extent you can use a credit card that you have to pay off in full at the end of each month and have every payment coming out of this. You can have expenses such as power and phone debited to the card and pay for groceries and other monthly expenses using it as well. This way you leave any deposits in the account for as long as possible and make one payment each month out to clear the card.

Having your all of your income go into your Revolving Credit Account, sticking to the practices above and being disciplined about leaving deposits in the account can save you a lot of interest and mean that you could pay your mortgage off a lot quicker than using traditional mortgage products.