This is the commonest type of credit finance popular all over the world. Consumers, both ladies and gents, open an account with shops and stores from where they buy on credit throughout the month and pay off at the beginning of the next month. The usual period of credit is one month. Those who pay off their debts regularly are considered to be good and reliable customers. Those who are poor in paying off find it difficult to buy on credit.
The Charge Account is interest-free but the customer cannot receive cash discount. This is short Term loan is unsecured i.e no guarantee, surety collateral or security is required.
The account incurs cost on the seller. He has to meet the expenses on investigation, risk, collection, reminders, phone calls, book-keeping etc. Charge Account is common in home delivery of newspapers magazines, milk.
The main disadvantage of the account is that the account holder is inclined to excessive and unnecessary buying, and at the time of payment they feel over-burdened.
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