Credit Sale Definition

Ever wondered what credit sale is? You hear it all the time, especially when conversing with creditors, debt counsellors, and even collectors. Simply, it’s not quite cash, not quite layby. It’s you agreeing to pay the seller back in full, usually with some added interest for the privilege of waiting. The seller lets you take the item without needing immediate cash. Keep reading for a full breakdown of what credit sale is and how it impacts you.

Types of Sales Transactions

There are 3 main types of credit transactions, namely cash sales, credit sales, and advance payment sales. A cash sale is when a buyer collects cash and goods or services are delivered to you. In contrast, when credit is sold, you’re given time after the purchase to pay back the seller. Lastly, an advance payment sale is the act of a customer paying in advance before a sale is made.

Credit Terms and Credit Sales

Usually, credit sales include credit terms. These are rules that tell you when payment is due for sales that are made on credit, possible discounts, and any applicable interest or late payment fees. For instance, let’s say you geta 2/10 discount opportunity, meaning that if you can pay for the entire purchase within 2 days (that’s the 10!), you get a 2% discount, net 30. Net 30 is the regular payment date. So if you don’t get the discount, you still have to pay the full amount owed.

Pros and Cons of Credit Sales

There are different advantages and disadvantages of credit sales.  An advantage is that credit sales attract new customers with the buy now, pay later concept, alleviating pressure to pay immediately because not everyone can pay right away. One disadvantage is that a customer can go bankrupt. The money they owe could be unpayable and so written off, meaning the company loses money. Also, costs of collection could lessen profit. If a customer misses the payment or refuses to pay, the company may incur collection costs in trying to obtain the payment.

Credit sales.

By understanding credit sales and managing them effectively, you can make informed purchasing decisions and avoid potential debt problems. If you have any questions, be sure to contact Cape Town Legal Consultants! We’re here to help.