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If I pawn a clock or a house, the lender does not have a credit risk, but a risk that their evaluation of the value of the collateral will not be correct when if a time comes when the collateral needs to be sold. Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
Then again, some people say "all risk is liquidity risk". There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
Liquidity risk is a political problem of whether you get to defer payment. Credit risk is a fundamental problem of whether you are able to make payment.
- Jake Friends come and go. Enemies accumulate.
You need one to make a hotel or plane reservation, or to rent a car, even if you plan to pay cash. Many stores require a credit card to accept your check. Responsible use of a credit card builds a good credit rating, too, marking the owner as mortgage-worthy. But people who have never had credit or need to repair a poor credit history may not qualify for a regular credit card.
But people who have never had credit or need to repair a poor credit history may not qualify for a regular credit card.
Sweden instead uses implicit credit worthyness unless the central government register says that we failed to pay a bill so many times that it ended up with Kronofogden. Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
The advantage of this system is that you can (could, until a few years ago) write a cheque for just about anything. The banks are trying hard to stamp out the massive use of cheques (because they cost them money) and force us to use credit (or debit) cards.
Credit card balances are paid off automatically every month from your bank account, so you can't have outstanding balance on your card (what you have instead is an overdraft). It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
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