Credit involves the deferral of payment of a debt. Buying on credit is not free: the consumer pays interest and fees on the money borrowed as well as the original purchase price. In recent years the use of credit to obtain consumer goods and services has dramatically increased.

Credit can be provided in a variety of forms such as:

Credit can be provided from a variety of sources:

The advantage of using credit is that the consumer is able to use the goods or services when they do not have available cash. Whilst the increased availability and flexibility of credit increases consumer choice comparisons between the various forms can be difficult and problems often occur.

The prudent consumer should take several steps to avoid problems. Consider whether the purchase needs to be made on credit at all. If cash is not available consider using lay-by as a cheaper alternative. Buying on credit should be treated like any other purchase and it is wise to shop around.

Important information to consider:

For further detailed information about different types of credit problems and possible solutions for consumers, see www.moneysmart.gov.au