An important difference between revolving credit and a general line of credit is
A)that a bank has a legal obligation to honor a general line of credit.
B)that a bank receives a commitment fee for guaranteeing the funds under a general line of credit.
C)the commitment fees on a general line of credit are generally higher than the commitment fees on a revolving line of credit.
D)that a bank has a legal obligation to honor a revolving line of credit.
E)that there are no differences between a general line of credit and a revolving line of credit.

Question

Quizplus · Accepted Answer

The important difference between revolving credit and a general line of credit is that a bank does not have a legal obligation to honor a revolving line of credit, whereas it does have a legal obligation to honor a general line of credit. A revolving line of credit is based on the borrower's creditworthiness and may be revoked or reduced at any time by the bank, whereas a general line of credit is a legally binding agreement between the bank and borrower to provide funds up to a certain limit for a specified period of time.

An Important Difference Between Revolving Credit and a General Line