Definition
Credit is any form of borrowing in which payment of cash or other consideration is expected to be paid at a later time.
Analysis
Credit is what allows consumers to obtain higher-priced assets prior to being able to pay for them. It allows for the purchase of cars to go to work, homes to live in and college education to allow for higher future income.
Credit also allows for the purchase of consumer goods that we want to pay for over time, such as electronics and furniture. These are items that most people could reasonably afford to save for in order to buy at a later time, but we like the convenience of bringing it home now and making small payments over the next 6 to 24 months.
Credit also serves an additional convenience, as it allows us to pay for smaller items when we do not have cash on hand. Small purchases, such as food and gasoline can be put on a credit card or even a debit card without having to necessarily carry cash. This can also benefit business owners and employees, as credit allows for business-related purchases to be easily recorded and tracked.
Various Forms of Credit
credit card
unsecured debt
secured loan
secured credit card
line of credit
mortgage
debit card
