Credit account

A credit account is an open account that a customer has with a supplier or store, under which the customer can make purchases and pay for them at a later date. This is essentially a no-interest accounts receivable arrangement. Historically, this was a handwritten ledger in which was stated all sales to a customer, offset by all payments made by the customer.

The term has been largely superseded in business by the concept of buying on credit, where a company grants a certain amount of credit to a customer, allowing purchases on credit up to the maximum amount of the credit granted to that customer. Billings are made by invoice, and must be paid by a certain date, or else the amount of credit will be reduced or cancelled.

For the consumer, the credit account concept has morphed into the store credit card, which a consumer can use to make purchases up to the credit limit stated for the card.

Similar Terms

A credit account is also known as a charge account or credit card account.

Related Courses

Credit and Collection Guidebook 
Effective Collections