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Mutual credit is a type of alternative currency in which the currency used in a transaction can be created at the time of the transaction. LETS are mutual credit systems. Typically this involves keeping track of each individual's credit or debit balance. Although the effect is like a loan, no interest is charged, and since mutual credit allows for trading and cancelling balances with others, debts can be paid off indirectly. The "IOU" is a common example of this.

Advantages and disadvantages[edit]

One economic advantage of mutual credit is that the currency supply is self-regulating—the money supply expands and contracts as needed, without any managing authority. The availability of interest-free loans is a great advantage to members of the system.

One downside of mutual credit, as with any form of credit, is the possibility of exploiting the system by running up a negative balance and then leaving.[citation needed] This problem is often addressed by caps on negative balance which can be raised as balances are paid off, or by limiting the system to a small, close-knit community based on trust, where the community holds people accountable. For this reason,[citation needed] most mutual credit systems are small (under 2000 members)[citation needed].

Examples and types of systems[edit]

LETS, the Community Exchange System and the Cincinnati Time Store are examples of mutual credit systems. A number of different mutual credit systems have been proposed. Mutual credit can be combined with a number of features of alternative currency systems. For example, it is usually (but does not need to be) a local currency, and it can have a demurrage fee for the holding of balances.

See also[edit]


  • T.H. Greco. "Money: understanding and creating alternatives to legal tender". White River Junction, Vt: Chelsea Green Publishing, 2001.
  • moneyfix.org

Original courtesy of Wikipedia: http://en.wikipedia.org/wiki/Mutual_credit — Please support Wikipedia.
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11 news items


Thu, 17 Jul 2014 10:47:08 -0700

Standard & Poor's raised Liberty Mutual's credit rating one grade to BBB, two levels above junk, after the announcement. The deal “largely mitigates” the insurer's risk of having to add to reserves and reduces earnings volatility, the ratings company ...
Daily Mail
Tue, 29 Jul 2014 09:41:15 -0700

Labour's Lord Kennedy of Southwark, a director of London Mutual Credit Union, said a "great debt" is owed to service personnel for their sacrifices for the nation, as he called for a community bank that understands their needs to be established.
The Adviser (blog)
Wed, 23 Jul 2014 14:21:18 -0700

APRA claims ADI ownership restrictions are in place to enable a bank to raise capital through its shareholders. But an inconsistency exists because mutual credit unions and building societies don't have shareholders, they have members. They are unable ...

MacroBusiness (blog)

MacroBusiness (blog)
Tue, 08 Jul 2014 12:41:15 -0700

Most recently was the story of Beijing residents going to credit companies for real estate spec loans. They can also serve as the link between companies' mutual credit guarantees, such as the web of guarantees seen in a city like Xiaoshan or among the ...

Edinburgh Evening News

Edinburgh Evening News
Sat, 19 Jul 2014 01:05:45 -0700

Meanwhile, the Methodist Church in Scotland is forging new links with the Church of Scotland and the Church of England to launch the Churches' Mutual Credit Union on October 1. It is aimed at members of the clergy but will be available to all “active ...


Fri, 11 Jul 2014 05:19:20 -0700

In 2013 they provided £200,000 of start-up capital to the credit union the Church itself is establishing, the Churches' Mutual Credit Union. "As active stewards of their investments the Commissioners will continue to engage with financial services ...

The Oxford Times

The Oxford Times
Sat, 12 Jul 2014 00:34:48 -0700

On Thursday, the Church of England released a statement to say it had withdrawn all its investment in Wonga and would be focusing on funding its own rival credit provider, the Churches' Mutual Credit Union. It is also expected to bring in tighter ...

The Globe and Mail

The Globe and Mail
Thu, 03 Jul 2014 15:43:04 -0700

In Britain, the Church of England is preparing to launch the Churches' Mutual Credit Union (CMCU) in October as a counter to payday loan outlets. The church has been campaigning against these lenders saying they are “fuelled by stagnant wages, rising ...

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