5 Things to Avoid with Your Bank Credit Card

It is not mandatory for banks in the UAE to use the credit reports issued by Al Etihad Credit Bureau (AECB) when it comes to deciding on a customer’s loan application, according to an article in Emirates 24X7 News in September 2014. Credit cards debts can affect your credit score and eventually your capacity to obtain a loan without having to go round in circles trying to convince banks of your credit worthiness.

How to Avoid the Debt Trap

More than a bad score, accumulating debt can affect your daily expenses as well. Listed below are a few things that you must not do with your bank credit card and that can save you from getting into a debt trap.

1.      Do not use your card to withdraw cash – There is a huge difference between a credit and a debit card. While withdrawal of money with the former is considered a mini loan, withdrawing from the latter is your own money. When you withdraw cash with the former, the cash is charged for interest at a certain percentage. Also, even if you clear you monthly balance, you are still charged a cash advance fee every time you withdraw cash.

2.      Ensure that you make the minimum payments – It is essential that you make the minimum payments and more, if you can. When you pay more than the minimum payment, you are charged less interest than what you would be charged for minimum payments. The minimum balance is calculated off a percentage of the outstanding balance. If you repay only the minimum balance, it will take you longer to repay your debt and you will incur a higher rate of interest.

3.      Watch out for balance transfer – You can get your balance transfer to a service provider that charges less interest. But you must also be aware of the interest rate hike after the initial months of low interest rate.

4.      Do not use it like a debit card – Do not use it to pay for every day expenses, such as groceries, magazines and more. It leads to huge debt accumulation.

5.      Do not miss the payment deadline – With online banking and ATM pay stations; it is much easier these days to pay your bills. You can also opt for automatic payment, where the minimum balance would be directly deducted from your account by the bank.

Apart from these things, you must also make sure to keep your bank credit card safe and secure to protect yourself against fraud or theft.

Why Does UAE Love Credit Cards?

Credit cards are the best option for large purchases without having to tote around too much cash or think about spending.

The UAE is one of the foremost shopping destinations in the world. Tourists and residents alike love to check out souks and several swanky shopping malls dotting the country. There are a multitude of options available in every product category, from cars to tissue paper. Also, all of the leading brands in the world are present in the UAE.

The wedding season has just commenced in the UAE in October, and the country is racing towards a festive finish to the year. Coming on the heels of the shopping season during Ramadan, this has opened up a veritable treasure trove of shopping, dining and recreational activities for the country’s masses. Major retailers and e-commerce sites are unveiling a host of special offers and discounts on everything from food to furniture.

Those living in the country are enthusiastic shoppers, using their cash or cards liberally to purchase the items of their choice. However, credit cards find particular favour among the populace. This could be attributed to the ease of shopping that credit cards provide. One does not need cash on one’s person or even in the bank to make large purchases. They give the shopper time to repay the borrowed cash within the stipulated payment window. This arrangement is ideal for the times one needs to make an emergency purchase but does not have the money for it.

UAE credit cards are offered by banks with a host of benefits and attractive discounts. While one card may offer a discount on film tickets on a particular day of the week, another might give the chance to collect points on purchase at select brands. Meanwhile, other UAE credit cards have a tie up with certain malls or e-tailers to offer a cash back option on every purchase. There are some credit cards that can be used to buy expensive furniture or electronic items on equated instalments at no additional interest.

It is extremely easy to get a credit card, too. Instead of trudging to the nearest bank branch, one can simply apply for a UAE credit card in the comfort of one’s home. The purchase process takes place within minutes and the card is delivered to the applicant’s address within a few days, along with the card documents and information.