There is a longstanding debate on the dominance and use of credit cards in Nigeria. However, it holds that its use by individuals and businesses is relatively low when we analyse the international scene. Here, we examine what credit cards are; their usage and overall timbre in the Nigerian Lending Industry.
What Is a Credit Card?
TheBalance describes it as a plastic card that lets you access the credit limit your card issuer gives you. A credit limit is like a loan. However, instead of giving you cash, the bank permits you to take as much credit as you desire for a period and then allows you to reuse the loan over and over. However, you are to pay back what you borrowed.
How They Work
A lot of processes goes on during a credit card transaction. When you swipe your card to make a purchase, the merchant’s card terminal asks your credit card issuer whether the card is valid and if you have enough available credit. Your card issuer sends a notification of the approval or rejection of the transaction. If it’s approved, you can take the goods and services and go on your way.
Every time you make a transaction, your credit goes down by that same amount. If you have a N100 credit limit and you make a N25 purchase, you’ll have N75 available credit remaining. You’ll owe N25 to the bank. If you borrow another N50 before paying back the N25 you borrowed, you would owe the bank a total of N75 and have N25 in available credit.
The difference between a credit card and a typical loan is that your limit is available after paying the balance on the card. In the earlier example, if you paid back the N75 that you owed, you’d have N100 of available credit again.
Credit Cards and The Nigerian Scene
For tourists visiting Nigeria, the perception of credit cards is different as opposed to that which natives hold. We are majorly associated with debit cards since an average Nigerian would rather classify it as a “form of imprisonment”. For financial institutions in Nigeria, offering these cards might pose a risk considering the rate of financial perversion in the country. If you have got a foreign-issued credit card, however, it can be employed in hotels, restaurants, malls, banks and other places.
These cards are issued locally to high-value individuals in Nigeria. A challenge for its low usage could be due to its unacceptability by merchants worldwide. However, we do hope our ranking on the international scene increases even as innovations in financial technology dominate.
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