What is credit?

Study for the FDIC AIDT Ready-To-Work (RTW) Money Smart Exam. Practice with multiple-choice questions, each with hints and explanations. Prepare for your assessment!

Credit refers to the ability to borrow money or access goods and services with the understanding that payment will be made in the future. When you take credit, you are essentially receiving a loan from a lender, which you then agree to pay back, typically with interest. This allows individuals to make purchases or investments that they may not be able to afford upfront. Understanding credit is fundamental to managing personal finances effectively, as it impacts one’s financial flexibility, potential for debt accumulation, and overall financial health.

The other options pertain to different financial concepts: lending money, saving, and wealth accumulation, which do not encapsulate the definition of credit as accurately as borrowing money does.

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