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.