Credit definition

Credit in the commercial term is can be said as the benefit of one's goodwill. Since the era of barter systems there has been en existence of credit in the market. People exchanged goods with each other and the person having a good credit was given extra benefits in the transactions.

Explanation of credit:

Credit is not just a commercial term but it is used in that field with the obvious reason of monetary benefit attached with it. It is the creditworthiness that can be attached with any individual and based on that the financial dealings with such person can be decided. In a pure commercial way, a credit can be explained as, when a buyer enters into transaction with the seller for a commodity and the seller does not ask for the immediate payment rather he gives a credit period to the buyer.

Different types of credit:

There are different types of credits we can find or here in the market. Some of generally used credits can be briefly explained as under:

1) Bank Credit: It refers to the creditworthiness that a customer has in case he wants to have any relief in the payments. In other words, it is the amount of credit that the banks can guarantee for the payment of transaction like personal loans payment, etc. It mostly depends on the fact as how were the relation of the bank and the customer and the financial condition of the customer.

2) Consumer Credit: Consumer is the one who consumes the goods or services. A consumer credit is a kind of credit that is available to the consumers for the purchase and consumption of non-investment expenses or purchases. For example the credit available on the purchase of daily items like food, clothes, etc. for personal consumption is a consumer credit.

3) Tax Credit: The same definition of the credit, applies to the tax credit. Tax credit refers to the deduction in the tax liability that is granted to the tax payer. Tax credit might be granted to encourage or control a particular type of transactions.

4) Trade Credit: When a buyer buys the good or services from the seller than he has to pay an amount to the seller. This payment can be instant or after a particular time. This delay granted by the seller to the buyer for the sale of goods is called trade credit.

This term credit can be used in different places, commercially and socially also. The one listed above is not an exhaustive list, there can be other types of credit available.

Credit fuels economy:

Credit is such kind of system which gives an extension to the buying power of a buyer. In other words, if a person is not being able to shell out the amount that is payable for a particular thing at a particular point of time, he can still buy that thing in the case of a credit transaction. The buyer will make the payment when his financial condition gets better. This increase in the buying power fuels the economy on a macro scale.

Credit trading has become a way of living for most of the people. The use of credit cards is good example of how we are habituated to the credit purchasing.

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