To buy goods on credit means to purchase items now and pay for them at a later date. This involves entering into an agreement with the seller, where the buyer receives the goods or services immediately but defers payment until a specified future time. Here are key aspects of buying on credit:
- Deferred Payment: The buyer does not pay for the goods at the time of purchase but agrees to pay the seller in the future, either in installments or as a lump sum.
- Credit Terms: The conditions under which the credit is extended, including the repayment schedule, interest rates, and any penalties for late payment.
- Creditworthiness: The seller may assess the buyer’s creditworthiness, which involves checking their credit history and ability to repay the debt.
Examples and Benefits
- Retail Purchases: Many retailers offer store credit cards, allowing customers to buy now and pay later.
- Business Transactions: Companies often buy supplies or inventory on credit to manage cash flow and maintain operations without immediate payment.
Potential Downsides
- Interest and Fees: Buying on credit can incur interest charges if the payment is not made within a specified period.
- Debt Accumulation: Mismanagement of credit purchases can lead to significant debt.
For more detailed information on buying goods on credit, you can refer to financial education resources like Investopedia or The Balance.