Consumer Credit

Credit:It is principle of buying now and pay later
Types of Credit:
Store Cards:These are plastic cards provided to their customere by latge retailers.They encourage shoppers to use particular stores.They encourage consumer loyalty.
Advantages to consumer:
1.Buy without cash
2.Interest-free credit if paid off each month
3.Incentives and additional services such as gifts and delivery.
4.Used in every branch of a particular store.
Disadvantages to consumer:
1.Overspending.It encourages impulse buying and irrational buying.
2.Interest has to be paid if all of the amount is not paid in one month.Some stores charge high interest rates.
Advantages to retailer:
1.Higher turnover
2.Consumer loyalty
Disadvantages to retailer:
1.Higher administrative costs as a credit control department must be set up.
2.Delay in payments.Risk of bad debts
Credit cards:These are plastic cards showing the cardholder's name, 16-digit account number, issue date, expiry date on the front side and signature of cardholder and security code on backside.Two most well known types are MasterCard and Visa.Businesses sign up with credit card company to be ablebto take payments on credit.
Advantages to cardholder:
1.Instant credit
2.Easy to carry
3.Free credit for at least one month.
4.Can be used in many different outlets e.g shops,hotels,garages in many countries.
5. May offer 0%interest for up to 12 months for transfer of balance from another credit card.
6.Can be used to charge expenses.
Disadvantages to cardholder:
1.Not accepted in many outlets.
2.Higher rate of interest compared to other types.
3.Encourages overspending and impulse buying.
4.Higher prices are charged by retailers.
5.In case of card being stolen, many unauthorised transactions already take place before fraud is discovered.
6.If cardholder does not report then he could be liable for losses from misuse.
Advantages to business:
1.Higher turnover and competitive edge which results in more customers attracted.
2.Less security risks.
Disadvantages to business:
1.Commission has to be sent to credit card company which reduces profits.
2.Higher administrative costs due to more paperwork and record keeping
3.Extra time to check whether card is stolen or credit limit exceeded.
4.Delay in payments and risk of bad debts.
5.Fraud leads to losses for credit card company.

Specialisation,Commerce and Direct Services

Specialisation: It is the tendency of people to concentrate on what they do best.
Specialisation takes place in a number of ways: by region, by country, by city, by factory and industry, by an individual.
Specialisation in workplace is specialisation by process.
Division of labour: It is breaking down a productive task into small portions and placing each portion under an individual so that each individual performs a different portion of the actual task. It allows a task to be completed quickly.
Specialisation allows manufacturers to take advantage of economies of scale.
Comparative advantage: The concept of countries specialising in producing one particular line of goods in which it is most efficient. It can trade them to buy the goods and services it needs but is unable to produce at home.
Commerce: It is concerned with distribution of goods and services .It is not concerned with producing goods but with providing services which make it easy to exchange goods and services. It is trade and aids to trade.Examples: Banking, Retailing, Transport, Advertising etc.
Aids to trade: Commercial services that help trade to function.
Industry,Commerce and Direct services are interdependent in the following ways:
1. Industry needs commercial activity and direct service to function properly.
2.Commercial activity would be meaningless if goods and services were not produced.
3.Countries are becoming interdependent.They rely on each other for raw material and modified goods.This is happening due to improved communication and transport facilities and the development of  a worldwide financial system.