What is Open Credit

What is open credit


  1. Flexible Payments: Pay for what you use by a specific date, usually monthly.
  2. Common in Nigeria: Extends to informal, community-based credit arrangements.
  3. Balancing Flexibility and Responsibility: Easy to use but requires careful expense tracking.
  4. Building Trust: Timely payments enhance reliability and creditworthiness.
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Open credit, often overlooked, is a unique and flexible form of credit that plays a significant role in daily financial transactions, especially in a country like Nigeria where flexibility and trust are key in financial dealings.

What is Open Credit?

Open credit is a flexible credit arrangement where the borrower is extended a line of credit without a fixed number of payments. Unlike instalment credit, where you have a set number of payments, open credit requires the full balance to be paid by a specific date, usually monthly. Common examples include utility bills and mobile phone plans, where you pay for the services used at the end of each billing period.

Open Credit in Nigeria

In Nigeria, open credit extends beyond just utility bills. It often manifests in informal arrangements, like credit from local stores or services where customers pay at the end of the month. These arrangements are based on trust and familiarity, reflecting the communal nature of Nigerian society.

Benefits and Risks

The main benefit of open credit is its flexibility. It allows for variable spending each month, adjusting to the user’s needs. However, this flexibility can also be a risk if not managed properly. It’s easy to accumulate a higher-than-expected balance, leading to potential financial strain when the payment is due.

Managing Open Credit

Effective management of open credit requires discipline. Keeping track of expenses throughout the month and setting aside funds for the upcoming bill are prudent practices. For informal credit arrangements, maintaining a good relationship with the creditor and ensuring timely payments is crucial.

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