Mutual Credit Line

A mutual credit line is the amount by which a member of a mutual credit system is allowed to run a negative balance. In mutual credit, members trade with one another using a shared unit of account instead of cash: when one member sells goods or services to another, the seller's balance rises and the buyer's falls by the same amount, so the total across all members is always zero. No money is lent by a bank; members effectively extend credit to each other. The credit line sets how far below zero each member may go, usually based on their trading history or turnover, and works much like a credit limit. Examples include business trade exchanges, local exchange trading systems and Switzerland's WIR Bank, founded in 1934. Blockchain versions are covered under blockchain mutual credit. Also see barter.