How to Choose a credit card in UAE

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Choosing a Credit card

Credit cards have been around for over 50 years. Banks and financial institutions offer tailor-made cards that tend to suit the specific requirements of a certain set of people. Choosing a card in such a market can be difficult as a wrong choice can lead you to pay hefty charges and an overall financial loss. The best way is to use the parameters used by banks when they create a new credit card offering. Here is a guide to help you cover the common aspects and choose the RIGHT card for you.

Spending Pattern

Each one of us has a unique spending pattern. Some of us like fancy dinners while some spend more on traveling. Or you might be a parent spending most of your income on your child’s education and basic necessities for the house. Identifying the biggest expense areas can help you analyze the type of credit card that would be an asset than a liability.

Annual fees

There is no free bread in the world. However, there are a plethora of free credit cards in the market [free = no annual charges]. Although this may sound like a no-brainer, consider this aspect carefully because most cards that charge an annual fee come with a host of benefits which can offset the charges and benefit you too.

Understand Interest rates

Undoubtedly the most important element of your credit card is the interest charged or the Annual profit rate [APR]. Ask questions and understand the rates and charges well before deciding. If you are looking for a Shariah-compliant credit card then the profit element needs to be understood well too.

General charges

Apart from the interest rates, credit card issuers might levy certain charges for facilities and service provided by them. Ask for a schedule of charges from the bank before applying for a card and check if it aligns with your spending pattern well.

Loyalty programs

So, here is the deal. You transact using your credit card, pay back in time but still get rewarded for using the card. This is exactly what the banks and financial institutions are offering through loyalty programs. They might have some terms and conditions but by and large, you can benefit a lot from these programs provided you don’t overspend and incur charges.

International usage

This needs a separate mention because these charges can be really steep if you select a wrong card. Most banks offer credit cards specifically benefiting consumers who are frequent international travelers. Tick this item off your to-check list without fail.

Credit Insurance

A credit card is a loan to the extent to which you use the card. Most banks urge consumers to buy a credit insurance along with the credit card to safeguard them from defaulting in the case of they are unable to repay the debt due to any unforeseen and unfortunate event like death or unemployment. This insurance comes at a nominal premium which is debited every month from your card. If you are not planning any big ticket purchases on your credit card, you can avoid it.

Buy now – Pay later

Banks and financial institutions realize that people want to have a certain lifestyle and they don’t mind paying later – in installments. Most banks offer zero interest installment options for a negligible upfront fee. Shop around and find which card offers the best deal.

Cash Advance

In simple words, it is the amount of cash you can withdraw from an ATM using your credit card. This is usually a certain percentage of your overall credit limit. This facility comes at an additional charge and the interest starts accruing from the day you withdraw. If withdrawing cash is on your agenda, then find the bank that offers the highest amount at the lowest interest rate and/or any additional charges.

I confirm that I have read the terms and conditions

Read those terms and conditions! The banks take an effort to write them for a reason. Disclaimers and T&Cs are the major areas of discord between banks and consumers and that is primarily because people don’t bother reading them.

A credit card can be a great financial tool if handled responsibly. Catching the downward spiral of debt can have far-reaching damaging effects on your finances and creditworthiness – be an aware card holder.

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Q. Can I get a credit card with no credit history?

A. Yes. However, you might have to look around and talk to a few banks before getting your application approved. Banks tend to prefer customers who have a proven track record of handling debt responsibly. That shouldn’t be a deterrent if you have a good job/business and your documents are in order.

Q. Can I get a loan on my credit card in UAE?

A.Many banks offer Loan on the Credit card as a standard product in UAE. The interest rates are lower as compared to the credit card and the processing is quicker. Banks usually allow you to select the repayment tenure as per your convenience.