Let's take a moment or two to clear a few things up. Credit isn't borrowed money. It's the ability to borrow money. The borrowed money itself is called the loan. Therefore, if someone - such as a bank or department store - gives you credit, it actually means that they'll allow you to borrow money in order to buy something. It also means, however, that they'll want to be paid back - and not just what you borrowed, but an additional amount known as interest. You should take a great interest in interest; it can be described as the cost you pay for borrowing money - in other words, it's the lender's profit. But we're getting just a bit ahead of ourselves. In order to really understand credit, you need to know a little something about money. Ah, we hear you smiling...

Just what is money, exactly?

So, you like money, do you? It's quite all right if you do; you're certainly not alone. Most people seem to have a fondness for it. But why is that? Well, quite simply, it's because money is the world's preferred medium of exchange, which simply means that it's the item that's most widely accepted in exchange for a seller's goods or services. In other words, you give the seller your money (also commonly known as currency), and the seller gives you the items that you want. If rocks were an accepted medium of exchange, you could hand the seller a bag full of them and get what you desired. (Wouldn't that be wonderful?) However, money is what's needed; people have been using it - in some form or another - to make purchases since ancient times.

Dollars and coins

Greenbacks, Dead Presidents, C-notes, dough, cake; regardless of the nickname used, they all refer to the same thing - cash. Dollar bills are paper money that represents a certain value. What value, you ask? Put bluntly, an amount of goods or services that a seller is willing to give you for the particular dollar's denomination (in other words, whether it's a 1-, 5-, 10-, or 20-dollar bill, for example). A grocer may decide to sell you a loaf of bread for one dollar, or perhaps two bags of groceries for $100 - which, at today's prices, isn't too far out of line.

That's the easy part. Unfortunately, it gets more complicated when you realize that these dollar values change all the time, even throughout any given day. That's a function of the Foreign Exchange market, but we're digressing.

Coins are money that has a certain amount of valuable metal in them, such as copper, silver or gold. But unlike paper money, which could actually become about as worthless as Monopoly money under extreme conditions, coins will generally maintain at least some real value because of the metals that they contain. As a matter of fact, many very old coins that are no longer minted (the process by which coins are made) are collector's items and have become very rare and expensive.

Currencies of other countries

Each country has its own official currency. For instance, the U.S. uses dollars. But so do Canada, Australia, and a number of other nations. Each one is different, however; Canadian dollars are used in Canada, Australian dollars in Australia, and so forth. Mexico, the Philippines, and various others use pesos. Again, Mexican pesos are different from the Philippine variety. Great Britain has their British Pounds, Japanese currency is called Yen, and the new European Union (often referred to as the EU) uses the Euro. Each of these currencies has different values in relation to the money of other countries. For instance, if you visited a foreign country and suddenly got hungry while you were there, you might be able to buy two loaves of bread for your dollar instead of just one. On the other hand, you may only be able to get half a loaf. It all depends on the value your dollar has in that particular locale. The table below will give you an idea of how much of the other currencies one U.S. dollar is equivalent to, but don't worry too much about what the exact values are; they'll change before, after, and quite likely during the time that you're reading this article. (At the time of this writing they were correct. However, by the time this article is edited, HTML-coded, and uploaded to the Web, the values will have changed twelve times. Add another twenty to thirty fluctuations before you actually read it and, well, you get the picture. Just use these values for illustration purposes only.)