Credit refers to an arrangement where you buy goods and pay for them after you have taken possession of them. Often you pay off the item in instalments over a period of time.

Examples of credit include:

• accounts at shops (for example, an account at a clothing store)
• accounts at professional service providers (for example, an account at the doctor)
• lease agreements or instalment sale agreements (for example, where you agree to pay for an item over a period of time, like at a furniture store – these used to be called hire-purchase agreements).

You can also get credit from a bank or a micro-lender. In this case, you are given a cash loan. You are required to pay back the loan over an agreed period of time. You are also required to pay interest on the loan.

It is important to note that, when you buy on credit, you are likely to pay more than if you paid for the goods in cash. To make sure that you know how much you will actually pay if you buy on credit find out:

• the cash price and the extra costs
• what the total amount will be
• how much the deposit is
• what the monthly payments will be
• how long you can take to pay off the amount.