A “Credit Crunch” or “Credit Crisis” is defined as a lack of availability (or reduction in supply) of credit to both consumers and businesses from traditional financial institutions.

In plain English, it means that the banks and credit card companies aren’t making as many (or any) loans, and that the loans they are making – at much higher interest rates – are only to people and businesses who have both excellent credit and lots of assets for collateral.

So, if you’ve ever heard the old saying that “the only people the banks will loan money to are the people who don’t need a loan”, then you understand the Credit Crunch perfectly.



For an in-depth graphical explanation of the Credit Crunch, press the PLAY button above.

For a look at the development and future of the global financial and credit system, watch: