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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. Local exchange trading systems (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, especially if it is run with unsecured debt, is the possibility of people exploiting the system by running up a large negative balance and not repaying it. This problem can be addressed by caps on negative balance that can be raised as balances are paid off. The problem can also be addressed by a using a well-worded membership agreement with clauses that specify members remain fully liable for all negative balances and reasonable time limits for calling in stagnant negative balances. Another solution is limiting the system to a small, close-knit community based on trust, where the community holds people accountable. Perhaps for this reason,[citation needed] most mutual credit systems are small, under 2000 members.[citation needed].

Examples and types of systems[edit]

The local exchange trading system (LETS), the Community Exchange System, the Cincinnati Time Store and, (in the United Kingdom), the Echo business trading network 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. E-book excerpted version

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


Anglican Communion News Service
Fri, 13 Feb 2015 00:07:52 -0800

The Archbishop of Canterbury's drive to promote access to responsible credit and savings receives a major boost today with the launch of the Churches Mutual Credit Union Ltd. (CMCU). The Most Rev Justin Welby joined the Moderator of the General ...
Church Times
Thu, 19 Feb 2015 16:22:30 -0800

The Churches' Mutual Credit Union (CMCU) is a collaboration between the C of E, the Church in Wales, the Scottish Episcopal Church, the Church of Scotland, and the Methodist Church. Any cleric, lay minister, or employee of a church or church charity is ...

World Religion News

World Religion News
Tue, 17 Feb 2015 13:00:00 -0800

The name that was decided upon was Churches' Mutual Credit Union. The current program is only open to church workers, but will become available to all others within months. The idea is to give some 60,000 church workers access to the program so that ...

BBC News

BBC News
Tue, 10 Feb 2015 16:56:15 -0800

The Church of Scotland has launched a credit union, claiming it will offer a 'fairer' alternative to banks and payday lenders. The Churches Mutual Credit Union (CMCU), is a collaboration with the Church of England and other denominations. About 35,000 ...
Toward Freedom
Mon, 02 Mar 2015 11:30:00 -0800

Timebanking is mutual credit, where whenever somebody provides a service to a member in a timebank, they get credit, which they can redeem for that same amount of time to get something they need from someone else in the network. It's fluid and flexible.

3BL Media (press release)

3BL Media (press release)
Tue, 03 Mar 2015 12:03:45 -0800

Developed over the last four years, Mutual Aid Networks are a new form of cooperative that utilize many collaborative economic tools, such as timebanking, price-based mutual credit, shared resources, lending pools, and cooperative savings, to create a ...

Patheos (blog)

Patheos (blog)
Mon, 23 Feb 2015 07:39:02 -0800

... public banking system (through the government) over against the current private banking system; Thomas Greco's paradigm of local credit exchanges; and Anthony Migchels, in the Netherlands, and his successful experiment with a mutual credit exchange.
Tue, 11 Nov 2014 09:48:45 -0800

Nov. 11 (Bloomberg) -- Old Mutual Plc, the largest insurer in Africa, had its credit rating lowered one level to Baa3 by Moody's Investors Service as a result of the weakening credit worthiness of South Africa and its banking system. The downgrade ...

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