While many credit managers accessing this site are only interested in "commercial" or "business" credit, it is worthwhile to examine the topic of credit to consumers.

Consumer credit is defined as credit extended to a natural person primarily for personal, family or household purposes and may be either closed-end or open-end credit. It excludes business and agricultural credit, and loans exceeding $25,000 that are not secured by real property or a dwelling. It also must be extended by a creditor, although it can be advertised by someone else, such as a builder, real estate broker or advertising agency. Consumer credit can be classified as open-end, closed-end or incidental.

Open-end credit means credit extended under a plan which a creditor may permit an applicant to make purchases or obtain loans from time to time directly from the creditor or indirectly by the use of a credit card, check or other device. Open-end credit generally consists of credit card accounts with small credit lines to the most creditworthy borrowers. Today, open-end credit generally includes accounts with much larger lines of credit to diverse borrowers with a variety of risk levels.

In open-end credit, the creditor:

• Reasonably expects the customer to make repeated transactions
  
• May impose a finance charge from time to time on the unpaid balance
  
• Generally makes the amount of credit available again to the consumer as the outstanding balance is paid
  

Examples of open-end credit are bank and retail gasoline credit cards, department stores' revolving charge accounts, and cash-advance checking accounts.

Closed-end credit includes all consumer credit that does not fit the definition of open-end credit. It consists of both credit sales and loans. In a typical closed-end credit transaction, credit is advanced for a specific time period, and the "amount financed," "finance charge," and "schedule of payments" are agreed upon by the lender and the customer. Single payment loans and installment loans are examples of closed-end credit.

Incidental Credit is extended by service providers, such as a hospital, doctor, lawyer or retailer and allows the client or customer to defer the payment of a bill. There is no credit card involved. There is no finance charge and no agreement for payment in installments. Payment must be made in four installments or less.