Consumer Credit

[1] Consumer credit (CC) refers to non-mortgage personal loans. It is a type of credit extended to individuals for purchasing consumer goods and services.
- CC allows individuals to buy expensive consumer goods without having the money ot pay for them in the bank.
- With some types of CC, consumers do not need to carry a large amount of cash.

[2] The common types of CC in HK including credit cards, overdrafts, lines of credit and installment loans.

[3] Credit Card - upto the pre-approved credit limit.
Advantages: Convenient for making purchases, Safe, Worldwide acceptance, Repayment flexibility.
Disadvantages: High interest rate, Risk of credit card abuse, Rejected by certain shops.

[4] Overdrafts - withdraw more money than they have deposited in their accounts.
Advantages: Prevent a cheque from being dishounoured, Provide short-term liquidity, Repayment flexibility.
Disadvantages: Can be a trap for creating debt if used improperly. High interest rate.

[5] Lines of credit or revolving loans. Allow consumers to borrow and repay money anytime up to a pre-approved amount. Within the pre-set limits, consumers can use as much of the available credit as they like.
Advantages: Convenient for borrowing money, Repayment flexibility, Interest is usually lower than that on credit cards and overdrafts.
Disadvantages: Can be a trap for creating debt if used improperly.

[6] Instalment loans or instalment credit. Loans with a fixed number of payments for repaying both the loan principal and the interest.

[7] Maintaining a good personal credit record is very important. This is because an individual may obtain credit mroe eaily and possibly at lower interest rates if he has a good credit record.

[8] To maintain a good personal credit record, individuals should:
- plan for consumption
- review spending habits regularly
- use CC with discipline
- avoid a sudden increase in credit card applications.
- consider their repayment ability when applying for loans.
- pay all bills on time.