Credit

Credit (from Latin credit, “(he/she/it) believes”) is the trust which allows one party to provide money or resources to another party where that second party does not reimburse the first party immediately (thereby generating a debt), but instead promises either to repay or return those resources (or other materials of equal value) at a later date.[1] In other words, credit is a method of making reciprocity formal, legally enforceable, and extensible to a large group of unrelated people.[2]

The resources provided may be financial (e.g. granting a loan), or they may consist of goods or services (e.g. consumer credit). Credit encompasses any form of deferred payment.[3] Credit is extended by a creditor, also known as a lender, to a debtor, also known as a borrower.

Adam Smith believed that barter preceded credit in history, but most recent anthropological research[4] proved otherwise. Barter mostly took place between those individuals who lack trust with one another e.g. hostile or unknown tribes usually made their transactions via barter. On the contrary, members of the same tribe mostly settled their transactions in credit/debt.

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