The use of credit cards is rapidly increasing worldwide, driven by the expansion of the digital economy and growing interest in cashless transactions. In particular, the rise of e-commerce, subscription services, and online payment platforms has made credit card usage more convenient and attractive. Alongside developed nations, the adoption of credit cards is also growing in developing countries due to the expansion of banking services, fintech innovations, and various rewards or cashback benefits. Moreover, the integration of contactless payment technology and mobile wallets has made using credit cards even more convenient, taking their usage to new heights. Additionally, credit cards are providing opportunities for individuals in developed countries to directly invest in capital markets.
Currently, credit card usage rates are the highest in the United States and Canada. According to the Federal Reserve, in 2023, nearly 70% of U.S. adults have at least one credit card. In Canada, a report by the Financial Consumer Agency of Canada in 2023 states that nearly 89% of Canadian adults own at least one credit card. Both countries’ high credit card usage reflects public trust in financial transactions and credit systems.
In developed nations, credit card usage is a common financial activity. However, in Bangladesh, its adoption is still limited, with cash transactions being more prevalent, posing a significant challenge to the country’s digital transformation of the economy. So, why is Bangladesh lagging behind in credit card usage? Let’s analyze the key reasons behind this.
Income Structure and Earnings
The primary barrier to credit card adoption in Bangladesh is income limitations. Most banks issue credit cards based on specific income criteria, meaning low- and middle-income individuals often do not meet these eligibility requirements. As a result, only certain corporate employees or high-income professionals can easily obtain credit cards.
Those earning through self-employment or freelancing find it even harder to qualify for credit cards. Although some banks in Bangladesh issue credit cards to freelancers, the availability is limited.
Religious Beliefs
As most of Bangladesh’s population is Muslim, many consider the interest-based system of credit cards to be haram (forbidden in Islam), as interest (riba) is prohibited in Islam. While some Islamic banks offer interest-free credit cards, their adoption and availability remain limited.
Documentation Complications
Obtaining a credit card in Bangladesh requires submitting several documents as per the bank’s requirements, including:
1. TIN certificate
2. Regular tax returns
3. Salary certificate and pay slip
4. Bank statements
5. Business permit and trade license (if the applicant is a business owner)
6. Guarantor information
In addition to these, financial institutions may require additional documents to verify the applicant's financial standing. For many, especially those working in informal sectors (e.g., farmers, small and medium-sized business owners, professionals, freelancers), gathering these documents can be challenging.
High Charges and Hidden Fees
Credit card usage in Bangladesh is associated with high fees and charges, such as:
1. High annual maintenance fees
2. Late payment fees
3. Cash advance fees
4. Over-limit charges
5. ATM withdrawal cash advance fees
6. Card processing fees
Apart from these, there are often hidden charges that customers are not informed about upfront. These hidden fees discourage users from adopting credit cards.
High Interest Rates: While the interest rates on regular loans in Bangladesh are relatively low, credit card interest rates are considerably higher. The average monthly interest rate on credit cards is between 2.5% and 3.5%, which translates to an annual interest rate of 30% to 40%, making it unaffordable for many.
Complexity and Confusion in Usage: Many people lack a proper understanding of how to use credit cards. Sales representatives from banks often fail to disclose important information, or present it in a complex manner. As a result, customers don’t understand how interest is calculated or how to avoid interest payments. This lack of transparency leads to negative experiences, causing customers to avoid credit cards after the first usage.
Additional Charges by Merchants: Some merchants add extra charges when payments are made with credit cards, even though this practice is unethical. Despite Bangladesh Bank's guidelines against such practices, illegal extra charges persist. Many merchants impose an additional 1-3% fee for credit card transactions.
Limited ATM Access: Although Bangladesh has over fifty banks, there aren’t enough ATMs for credit card users. While urban areas have better access to ATMs, rural areas have very few. Some banks lack their own ATMs, forcing customers to use other banks' ATMs, incurring high fees in the process.
Mobile Financial Services (MFS) and Extra Charges: Popular mobile banking services in Bangladesh, such as bKash, Nagad, and Rocket, impose extra charges for cash withdrawals. Banks also levy extra charges for credit card bill payments through MFS platforms. As a result, many customers prefer mobile financial services over credit cards.
Low-Quality Customer Service: In Bangladesh, the quality of customer service provided by many banks is often subpar. Bank customer care centers sometimes provide misleading information, and when issues arise, customers don’t receive timely support. As a result, many customers choose to stop using credit cards after a poor experience.
Solutions to Overcome the Challenges
To increase credit card adoption in Bangladesh, banks and authorities must take proactive steps, including:
1. Simplifying credit card issuance with lower income thresholds, particularly for low- and middle-income individuals.
2. Promoting Islamic credit cards to align with religious beliefs and increase the availability of interest-free options.
3. Reducing hidden fees and implementing a transparent fee structure.
4. Increasing awareness by providing accurate information and training through bank representatives.
5. Regulating merchants to prevent illegal extra charges and taking strict action against violators.
6. Expanding ATM networks and improving digital payment infrastructure across the country, especially in rural areas.
7. Simplifying credit card access for freelancers and self-employed individuals.
8. Conducting awareness campaigns to eliminate the negative perceptions about credit cards.
9. Expanding credit card access beyond district towns to broader regions of Bangladesh.
If these challenges are addressed, the adoption rate of credit cards in Bangladesh will significantly increase in the future.