How To: Leveraging Consumer Credit For Future Returns

Consumer credit is the loan of monies to an individual for uses other than for a mortgage. The money can come in many forms, credit cards, loans and lines of credit for the purchase of goods and services. Consumer credit usually refers to personal banking and not corporate banking but in some cases can mean either. The purpose of consumer credit is to allow the consumer the opportunity to use funds that they do not need to pay back at that exact moment. It can be used to fund different things from a family vacation to the purchase of new furniture. Banks and lenders make it fairly easy to borrow money that consumers will then pay interest on for the use of.

Corporate Banking

Corporate banking allows for loans and lines of credit but it is not referred to as consumer credit or lending. It is business credit, where the companies’ credit score and ability to pay back the loan usually allow for higher borrowing amounts and in some case lower interest rates.

Personal Banking

Personal bank accounts and personal lending opportunities are available at many banks. Banks have consumer credit in the form of short term loans and credit cards. Different amounts can be issued along with many different terms and interest rates depending on an individual’s credit score and their debt to income ratio.

Credit Cards

Credit cards offer banks a return on their investment. This is due to the interest that is charged on the account. If there is a consumer that is constantly paying off their credit card before the interest is due than that customer is not earning the bank any money. The consumer would need to allow the funds used to accumulate an interest charges for the bank to make any return on their initial investment.


Lenders use loans as a way to earn money. The return on their investment like credit cards is the interest that is charged on the loan. If a consumer is able to pay off the loan earlier than the terms of the loan than some banks will charge an early payoff amount helping to compensate them for the loss of interest earned. Others write in stipulations for no early payoff penalties, allowing to consumers to pay off their loans in full without fear of extra charges.

Banks and lenders definitely leverage consumer credit accounts to help the banks future return on investment. They offer deals such as low interest balance transfers, or no interest for a certain amount of months. The credit offered as no interest for say 12 months accumulates interest on the whole amount if not paid off by the 12 month term. So if a consumer only had fifty dollars left due but did not pay it off before the year was up than they would be charged interest on the full one thousand dollars of the original purchase. Lenders and credit card companies offer a great service to many consumers. The trick for the consumer is to be aware of all of the stipulations and how to obtain credit at little or no cost to them while obtaining all of the benefits of a credit card or loan.