Which of the following best defines revolving debt?

Revolving debt is best defined as a credit limit where the borrower can make purchases and pay off the balance over time. This type of debt allows for flexibility in borrowing, meaning that borrowers can withdraw funds up to a specified limit, repay those funds, and then borrow again as needed. This cycle can continue indefinitely, as long as the borrower stays within the credit limit and makes the required minimum payments.

This characteristic of revolving debt is exemplified by credit cards or lines of credit, where borrowers can carry a balance and accrue interest on amounts owed, but have the option to increase or decrease their debt by making new purchases or paying down their balance. The adaptability offered by revolving credit supports ongoing financial needs while providing a way to manage debt effectively.

In contrast, other options describe fixed loans or secured debt agreements, which do not involve the same flexibility or continuous borrowing capabilities as revolving credit does. Understanding how revolving debt functions is critical for individuals, as it impacts credit scores and financial health based on spending and repayment habits.