CREDIT and credit instruments
- Credit is when an individual borrows money or buys commodities without making cash payment.
- Credit instruments refer to the written documents which guarantee payments at a given future date and they give the holder the right to receive money. Credit instruments include the following:
- Cheques. This is an order by customers to the bank to make specific payment to the required person(s) on their behalf.
- Promissory notes. This is a written promise by the buyer to the seller to make a specific payment at a future date.
- Bills of exchange discounted before the maturity period.
- Credit cards
- Bank drafts. This is a form of a cheque which is issued by one bank to another bank. It reduces the burden of carrying large sums of money from one bank to another by the individuals.
- Overdraft. This is where the customer withdraws more money than what is on his/her account. Interest is paid on the amount over drawn.
- Government securities (bonds and treasury bills)
CATEGORIES Economics
TAGS Dr. Bbosa Science
