How It Works

Here is a step by step explanation of how mutual credit works:

1. Membership & limits The group decides who can join and sets a credit limit for each account (how far negative you can go) and sometimes a corresponding positive limit.

2. Issuance at the moment of trade Alice buys 100 units of services from Bob. The ledger posts: Alice **–100**, Bob **+100**. No coins were minted; the “money” is just entries.

3. Circulation through further trades Bob spends 30 with Carol. Now: Alice –100, Bob **+70**, Carol **+30**. Totals still add to zero.

4. Redemption by earning If Alice later sells 60 to Dana, Alice moves to –40, Dana +60. To “pay off” a negative balance, you **sell** into the network.

5. Retirement When everyone’s trades net out, positive and negative balances shrink; issuance and retirement happen organically through trading, not by a central issuer.

# See - Mutual Credit and How It Works? - How is it Different? - Governance Levers - Mutual Credit Strengths - Risks and Challenges - Common Variants