Final answer:
Credit terms define the agreements regarding the amounts and timing of payments between a buyer and a seller for received goods and services. A credit card provides a short-term loan, and the use of borrowed funds affects one's credit score, which in turn influences future credit availability and terms.
Step-by-step explanation:
Credit terms refer to the agreements between a buyer and a seller on the amounts and timing of payments that the buyer will make to the seller as compensation for goods or services received. Specifically, credit terms are often detailed in invoices and contracts and can include the duration of time a buyer has to pay the seller, any discounts for early payment, and penalties for late payment. Credit is essentially borrowed money you can use to purchase goods and services when needed, which also means you are incurring debt.
When you use a credit card, the money is immediately transferred from the credit card company's account to the seller, and at the end of the billing cycle, you owe the corresponding amount to the credit card company. Thus, a credit card represents a short-term loan. Interest rates are crucial as they represent the cost of carrying a balance from one month to the next.
Building a credit score is important when dealing with credit. This score reflects to lenders how reliable you are when it comes to repaying borrowed money. Your credit score can affect the availability and terms of credit you receive, such as in loans or credit cards.