Credit – What is Credit?

Credit – Is simply another word for loan. However, the word can be used in slightly different contexts. You usually think of a loan as a regular loan in the form of a private loan, mortgage loan or something similar, where you either borrow money that you get into the account or that you borrow money that goes directly to pay something a little more expensive, such as a car or home.

Credit is a slightly more general term

bank

And this is often seen for example in connection with credit cards, installment purchases or even when shopping for invoices. Credit simply means that you have something in credit or owe something to someone and that can happen in many different situations.

When you buy your credit card you basically borrow the money from the credit card issuer until you pay the invoice. Usually you can borrow the money completely without interest as long as you repay them on the first invoice.

When you shop on installment / part payment something is also a credit when you have received a product but did not have to pay the full amount at the time of purchase. You have thus borrowed the remaining amount and repaid a little at a time for an extended period of time.

Account Credit

Account Credit

A credit can also mean that you have a rolling credit such as an account credit. This is an alternative to regular loans and to credit cards, which work so that you apply for the credit (eg USD 20,000) and get approved to use this amount whenever you want.

You do not borrow the money as you do for a loan, but have only been approved to use it when you need to. It is therefore a good alternative as a buffer. On the day you need to borrow money, you can only withdraw from the account credit, up to the maximum credit amount. Once you have repaid what you have used, you are also free to use the credit again, which is different from how a regular loan works.