In finance, the term on credit is used in reference to goods and services which are purchased without the immediate settlement of payment.
Merchants provide goods or services to buyers on credit because they believe that buyers will pay for those goods and services later. Goods and services provided on credit must – in most cases – be paid for within a pre-agreed time frame.
Many Swiss merchants provide goods and services on credit, allowing customers to pay via wire transfer or deposit slip after receiving the goods or services. Some retailers issue store cards which can be used to purchase goods on credit.
Buying on credit differs from getting a loan in that you do not borrow assets which must be returned. Instead, you receive goods and services which you must pay for in cash. Normally, you do not pay interest on the value of goods or services supplied on credit.
In the case of revolving credit, payment is not required. Instead, interest is charged on the debt. Credit cards and store cards are two of the most common examples of revolving credit instruments.
While a credit card lets you make purchases and pay for them a later date, purchases are in fact paid for immediately by your credit card issuer. The issuer gives you a loan every time you use your credit card to pay. You the repay the combined loans on the monthly payment-due date. Most credit cards let you carry your debt into the next month as long as you make a minimum payment, but you pay interest on this debt.
More on this topic:
Swiss credit card comparison
