Credit, in commerce and finance, term used to denote transactions involving the transfer o

f money or other property on promise of repayment, usually at a fixed future date. The transferor thereby becomes a creditor, and the transferee, a debtor; hence credit and debt are simply terms describing the same operation viewed from opposite standpoints.

The principal classes of credit are as follows: (1) mercantile or commercial credit, which merchants extend to one another to finance production and distribution of goods; (2) investment credit, used by business firms to finance the acquisition of plant and equipment and represented by corporate bonds, long-term notes, and other proofs of indebted ness; (3) bank credit, consisting of the deposits, loans, and discounts of depository institutions; (4) consumer or personal credit, which comprises advances made to individuals to enable them to meet expenses or to purchase, on a deferred payment basis, goods or service for personal consumption; (5) real-estate credit, composed of loans secured by land and buildings; (6) public or government credit, represented by the bond issues of national, state, and municipal governments; and (7) international credit, which is extended to particular governments by other governments, by the nationals of foreign countries, or by international banking institutions, such as the International Bank for Reconstruction and Development.

The principal function of credit is to transfer property from those who own it to those who wish to use it, as in the granting of loans by banks to individuals who plan to initiate or expand a business venture. The transfer is temporary and is made for a price, known as interest, which varies with the risk involved and also with the demand for, and supply of, credit.

Credit transactions have been indispensable to the economic development of the modern world. Credit puts to use property that would otherwise lie idle, thus enabling a country to more fully employ its resources. One of the most significant differences between some nations of Africa, Asia, and South America and the advanced Western nations is the extent to which the use of credit permits the latter to keep their savings continuously at work. The presence of credit institutions rests on the readiness of people to trust one another and of courts to enforce business contracts. The lack of adequate credit facilities makes it natural and necessary for inhabitants of developing countries to hoard their savings instead of putting them to productive and profitable use. Without credit, the tremendous investments required for the development of the large-scale enterprise on which the high riving standards of the West are based would have been impossible.

The use of credit also makes feasible the performance of the complex operations involved in modern business with out the constant handling of money. Credit operations are carried out by means of documents known as credit instruments, which include bills of exchange, money orders, checks, drafts, promissory notes, and bonds. These instruments are usually negotiable; they may legally be transferred in the same way as money. When the party issuing the instrument desires to prevent its use by anyone other than the party to whom it is issued, he or she may do so by inscribing the words ,not negotiable" on the instrument.

Creditors sometimes require no other assurance of repayment than the debtor's credit standing, that is, one's record of honesty in fulfilling financial obligations and one's current ability to fulfill similar obligations. Sometimes more tangible security, such as the guarantee of a third party, is required. Also, the debtor may be obliged to assign the rights to some other property, which is at least equal in value to the loan, as collateral security for payment. Bonds placed on sale by a corpotation are often secured by a mortgage on the corporation's property or so

A．hire

B．save up

C．put aside

D．store