Credit Cards need no introduction. Almost everyone has availed the benefits of using a Credit Card at least once in their lifetime. For those who haven’t, Credit Cards allow you to purchase goods or services on credit for a small fee. It is an alternative for cash and enables you to carry out internet-based and shop-based transactions with ease. UAE also offers Shariah compliant Credit Cards based on ‘Bai Inah’, ‘Wadiah’ and ‘Qardhul Hassan’. The high-cost of living in UAE makes Credit Cards a must-have financial tool in every household.
Over the years, Credit Cards have evolved to suit each of your spending needs. Some highlights are:
- Buy now pay later. This is the most important feature of a Credit Card. You will be assigned a credit-limit which is an unsecured loan based on your income.
- Some cards offer an interest-free period; clearing the entire bill within the period will not attract any interest charges.
- No need to carry cash around. Credit Cards offer cashless transactions eliminating the need to safeguard bundles of cash.
- Some cards charge an annual fee or joining fee which is very nominal.
- A great tool for exigencies, especially when you run out of cash.
- Most cards offer discounts at restaurants, online shopping etc.
- Some cards offer bonus points based on the amount spent using the card. These points can be redeemed for cash/gifts later.
Credit Card companies recognize your needs and offer cards well-suited to your spending habits. This has led to a plethora of cards available in the market in UAE. Let’s look at some variants available:
- Dining Credit Card: A foodie’s delight. These cards offer discounts at participating restaurants making your dinner outings lighter on your pocket.
- Travel Credit Card: Bitten by the travel bug? This is the card for you. It offers a host of benefits when you travel like free miles, free night stays at partner hotels, discounts on car rentals and many such benefits.
- Islamic Credit Card: These cards are compliant with the Shariah laws and are free from any Riba (interest) or Gharar (uncertainty).
- Insurance Credit Card: These cards are specifically designed to provide an insurance cover in exigencies. They offer benefits like Takaful insurance or personal accident cover.
- Student Credit Card: These cards offer discounts on school fees or cash backs along with the other benefits of a Credit Card. As a parent, this can be a huge relief considering the ever-increasing cost of education.
- Fuel Credit Card: These cards offer exclusive discounts at petrol pumps. Some of them also offer a range of free services like road assistance, discounts on International driving license, etc.
- Reward and Cashback Credit Card: Every time you spend on your card, these cards offer a small percentage of it back. A Reward card provides points which can be redeemed on specific products/services. A Cashback card converts a small percentage of your spending into cash and credits it back to your Credit Card account.
- Grocery Credit Card: Time to go grocery shopping but miss the haggling with the roadside vendor? The Grocery card offers special rewards and discounts at different grocery store chains.
There is a growing concern about various fees charged by Credit Card companies. While some of these are unavoidable, being meticulous with your finances can help avoid most of these charges. Here is a look at a majority of those fees:
- Annual Fee : charged annually for the primary card.
- Supplementary card annual fee : charged annually for all supplementary cards.
- Retail Interest : interest charged on the purchases made using the Credit Card
- Cash Advance Interest : interest charged on cash withdrawn using the Credit Card
- Cash Advance Fee : fee charged for availing cash advance on your Credit Card
- Late Payment fee : charges applicable if you do not pay your bills in time.
- Over Limit Fee : in case your spending + interest exceeds the prescribed limit.
- Card Replacement Fee : in case you want to replace your existing card.
- International Transaction Fee : for use in foreign currencies.
- Credit Shield : a cover to help you pay back the balance if you are unable to do so due to disability or death. This is provided on a monthly fee.
You need to be at least 21 years of age to apply for a Credit Card in UAE. You must have proof of regular monthly income. Every bank has its own criteria which need to be checked individually.
While every bank may have its own set of documentations required to approve an application for a Credit Card, below is a list of basic documents needed:
- Salary Certificate not more than 30 days old (for salaried individuals)
- Income details (for self-employed individuals)
- Bank Statements
- Valid Passport
- Valid UAE ID
You must ensure that these documents are available with you before you approach a bank for a Credit Card. Apart from these, banks may choose to ask for more documents to ascertain your credit viability.
- Usually, the minimum monthly payment is about 5 percent of the outstanding balance due.
- Expatriates can apply for a Credit Card too.
- Expats must surrender the UAE Credit Card if they move out of the country.
- You can own multiple Credit Cards if you want. However, ensure that you can afford the fees and charges associated with them.
- If used correctly, Credit Cards can be a great asset.
- Take advantage of the discounts and features of your card.
- Some cards offer interest-free periods so make sure that you pay back within that period to avoid extra charges.
- Contact your bank immediately if your card has been stolen or if you suspect misuse of any sort. Timely action can save you thousands of Dirhams.
- Don’t be reckless in your spending because you can always pay later. Beware of the debt-trap.
- Don’t delay your payments – avoid additional charges.
- Cash advance has additional fees associated with it. Use this feature judiciously.
- Don’t share your card details with anyone and ensure that your cards are kept secure always.
Remember, Credit Cards can be your best friends or worst enemies. They are financial tools designed to make life easier if used correctly. With an increase in the number of spending avenues due to growing number of shops online, you must exercise optimum control on your spending to make the best of this tool.