A Brief History Of Credit By Greer Lean At Isnare.com Ezine Articles

The term “credit” can mean a number of things, depending upon its application. To an accountant, a credit is merely the opposite of a debit. Debits appear in the left tally column of a ledger and credits appear in the column directly to the right. The total debits made must equal the total credits, and whether a credit increases or decreases the account balance is all according to a complex set of rules known as “generally accepted accounting principles” (GAAP).

“Blah, blah, blah,” you may be thinking, “what’s all this accounting mumbo-jumbo have to do with anything?” Fair enough, for most of us think of “credit” as the ability to obtain a loan or buy something on instalment payments over time. This sort of practice has been going on since the Assyrians, Babylonians, and Egyptians began trading goods more than 3,000 years ago.

Our word “credit” comes from the Latin credere, meaning to “believe or trust.” Another similar term is “incredible,” literally meaning “something so astounding that it is hard to believe.” When we ask someone for credit, we are asking them to believe us when we promise to repay the loan.

Our use of credit has expanded dramatically since the time of the Babylonians. Many agricultural societies worldwide still use a system where farmers purchase seed and other supplies on credit in the planting season and pay their accounts off in the fall after harvest time. Merchants who offer credit in this way have a competitive advantage over merchants who demand cash at the point of sale.

Perhaps the single invention most responsible for the explosion of credit was the credit card, first issued in the United States in the early 1950s. At first credit cards were for local use only, such as the Diners Club cards that were originally used only at participating restaurants in New York City. The addition of magnetic strips and computerized accounting systems in the late 1960s made widespread use of credit cards practical and set the stage for today’s age of electronic commerce.

As the credit system became more sophisticated, a consumer’s credit rating also increased in importance. These days, for persons with a poor credit score it can be nearly impossible to obtain a conventional loan. Unfortunately, in Australia your credit file only holds negative scores. This means that once you have a mark on your file due to an unpaid bill or payment, it will be on your file for a long time. This is why it is very important to keep bills paid on time. If you do find yourself short before payday, companies that offer payday loans can be a responsible lending source to get you through. As long as you choose a reputable company that doesn’t keep rolling your loan over, this is a safe way of short term lending that can hold huge benefits for the long term.

As the use of credit cards has increased, many people have become burdened with the resulting long-term debt and accumulating interest rates. Online payday cash advances are a great alternative to credit cards. Not only are they now able to provide money within an hour, but when you sign up for your loan, you are committing to a repayment schedule that is direct debited on your next payday. Put simply, payday loans are designed to keep you away from long-term debt.

Whether we like it or not, credit is here to stay. So make sure that it becomes your friend, not your enemy.

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