credit card
A credit card lets you spend the bank's money now and repay later, and it is the most expensive debt most people ever carry.
In plain English
A credit card is a small loan you can take without asking anybody, at a rate you would never accept if it were written on a form.
Used properly it is genuinely useful. Buy something, repay the full balance before the due date, and you have borrowed money for free. The card made you nothing and cost you nothing, and you kept your cash a few weeks longer.
Used the way most people use it, it is quietly devastating. Pay only the minimum and the rest keeps growing, at rates that can exceed 30 or 40 percent a year, compounding. A ₦300,000 balance paid at the minimum can take years to clear and cost you more than the original spending.
The minimum payment is not a suggestion of what you should pay. It is engineered to be the amount that keeps you in debt for as long as possible while feeling manageable.
So there is one rule, and it is not negotiable. If you cannot clear the full balance at the end of the month, you could not afford the purchase. The card did not change that. It only delayed you finding out.
You spend ₦400,000 and pay only the minimum each month at 35 percent. Years later you have repaid well over ₦600,000 and the balance is still not cleared. The item you bought was worn out long ago.
Questions people ask
Are credit cards ever worth having?
Yes, if you clear the full balance every month. Then you get short term borrowing at no cost, and sometimes rewards on top.
What is the minimum payment?
The smallest amount the bank will accept, engineered so that you stay in debt as long as possible. Paying it is not the same as making progress.
How do I clear card debt?
Stop using the card, pay far more than the minimum, and attack the highest rate first. Consider a cheaper personal loan to replace it, but only if you will not simply run the card up again.
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