In the past, people in the earliest societies found the advantage in using an exchange system when acquiring essential goods and services. The earliest system of exchange was the bartering system, which required individuals to trade their physical goods for the goods of others that were not readily accessible to them. Many of the things that people already owned were used as collateral towards making an exchange for something else. On occasion, small groups within a community would get together to barter goods because these communities were small and consisted of a very small number of people. These people all knew one another and lived within a close proximity of one another.
If anyone failed to make good on a promise or obligation; such an individual may have been traceable or easy to find. So far, the need for record keeping or the currency for payment was not necessary. The absence of the first two forms of exchange saved the barterers from going into enormous debt. Because if, every one of them was being made accountable for their actions; they had no way to barter beyond their means. Therefore, through each occurrence of non-payment could be resolved within a reasonable period of time without further incident. Bartering kept the terms debt or debt relief unimaginable because there was no written record of extended credit of a person’s financial transactions or how much they owed.
In the past, people relied mostly on the basic essentials they either found, produced, or made themselves and shared with others. This kind of economy was supported by the fact that there were small numbers of people located in sparse villages all over the globe. Given the close relationships created through cooperation and the bonding required to maintain a close-knit community. There was little necessity or opportunity to journey far from home. During this time, bartering was used as a way to supplement those goods and services that an individual does not already possess. They were able to build their own home or settle down on any plot of land or location of their choice. No further acknowledgement of a person’s rights to their possessions, privacy, and personal boundaries was needed.
The necessity to pay rent or mortgage for the right to ownership or a dwelling place had not occurred yet within the bartering community. There were no monetary housing costs. There were no monthly rents or mortgages ever being charged or paid. Therefore, the risks of accumulating debt and not being able to make monthly rent and mortgage payments when they are due did not exist. Nowadays, it is detrimental that everyone makes timely monthly payments to a realtor or landlord, or, they may face eviction as a result of some legal action taken against them. To prevent this from happening, a homeowner can seek assistance from a debt counselor or consultation in order to remedy the situation.
As world populations grew larger, it became more venturous and economic to use other forms of currency such as: record keeping of past transactions. Larger populations also gave rise to the inventions of copper, silver, and gold coins as a measure of currency. This is the way that strangers who did not already know each other or may never meet one another pay for things. Because, vendors, small shop keepers, and store owners have no reassurance that a good or service will be paid for at a later date except by an implied contract or a written contract.
As marketable trade became more widespread and the transport of foreign and domestic goods became more costly; the higher costs of goods, labor, and services was passed on to the consumer. So, consumers had to carry heavier money pouches to make their regular purchases. Due to the heavy weight of metal coins, paper money was invented because it is much lighter and easier to manage. That made one on one buying and selling a lot easier between the retailer and the customer.
Because a great deal of trust developed between small retailers in small modern towns retailers invented a practice called extending a line of credit. It was a practice by which a retailer will keep a record of merchandise taken from their store by trusted friends or customers without paying for them at the time of purchase. Business to business, transactions are done this way as well. And payment for goods is due at a later time.
This practice gave rise to the invention of credit cards on which extensions of credit is granted on most credit card accounts accompanied by a piece of plastic that allows everyone to make a purchase or make withdrawals at ATM machines up to a certain limit. Afterwards, a customer has to make minimal monthly payments to satisfy an outstanding balance, until, it is paid off. Unfortunately, banks extend lines of credit to their favored customers beyond their initial spending limit making it easier for them to get into financial trouble. When consumers begin to experience unexpected financial difficulty, such as unemployment; an ill-managed over the limit credit card balance can add to the consumer’s debt problems. The ideal is for the consumer to stay on top of these issues and not to be lured into the habit of overspending and debt creation that often damages their credit score.