A Beginner’s Guide to Credit Cards in the UAE

In the fast-paced economy of UAE, where the daily lifestyle of individuals is changing rapidly, people need requisite funds to cope with this evolving environment. Are you tired of missing out on exciting opportunities due to limited funds and wish to increase your spending power? If yes, credit cards in the United Arab Emirates might be the solution. Credit card is a powerful financial instrument which gives its users an advantage to fulfill their luxurious needs by increasing their spending power. In this blog, we aim to address all your queries related to the credit cards in UAE at one place.

What is a Credit Card?

A credit card is a financial instrument issued by banks or financial services companies which allows its users to borrow the funds from the parent card company, enabling them to make purchases even when their bank balance is low and pay back the amount to them in a given timeframe. It imposes a liability on the cardholder to pay the principal amount along with a nominal interest.

How do Credit Cards Work?

A credit card is an instrument which provides a short term loan to its users. It differs from debit cards on the basis of its loan providing capacity. Debit card uses the money from your checking account whereas this is not the case with credit cards. Amount of loan taken via credit cards needs to be repaid monthly with a certain amount of interest charged on your borrowing. Every activity done via credit card is closely monitored by the issuing body which helps them to make a fair credit report of its users.

Important terms related to Credit Cards in the UAE

The following are the important terms associated with the credit cards:

Credit limit

The issuer of the credit card determines its limit. The credit card limit is basically the maximum amount upto which the cardholder can borrow funds from the issuing body in a given timeframe.

Annual Percentage Rate (APR)

This is the rate of interest which is charged when you don’t pay your bill in full on every billing cycle.

Billing Cycle

The amount that you pay with a credit card does not come out of your bank account right away. Rather, the issuer maintains a record of your purchases over a designated time frame known as the billing cycle. Usually, there is a monthly billing cycle. The issuer compiles all of your transactions during this time and sends you a statement at the conclusion of the cycle. The due date—that is, the deadline for submitting at least the minimum payment—is also specified, along with the minimum payment that must be made.

Grace Period

Banks and financial services companies which provide credit cards allow its users to clear all their dues in a given timeframe. This is called the grace period.Grace period usually ranges from 20 to 55 days.

Credit Score

A credit score is a number that rates the creditworthiness of an individual to take loan or credit. This score serves as a tool for lenders to assess the risk associated with extending credit to a person. Higher the credit score, higher is the creditworthiness of an individual. Your credit history, which comprises details about the quantity of accounts you have, your overall debt load, your payment history, and other elements, sets the foundation of your credit score. 

Types of Credit Cards in the UAE

A credit card is an instrument which provides a short term loan to its users. The following are the various types of credit cards used in the UAE:

Standard Credit Cards

These are the most common types of credit cards issued in the UAE which offer various benefits including security and convenience. 

Travel Credit Cards

Travel credit cards offer various travel insurance and discounts on each travel expense transaction made using these cards.

Cashback Credit Cards

A cashback credit card is a financial tool that provides users with a unique incentive for their spending. Unlike traditional credit cards that primarily offer a line of credit for purchases, a cashback credit card gives a reward to its users after making any transaction. Essentially, every transaction made using the card results in a small cash rebate, offering a tangible benefit for using the credit card.

Rewards Credit Cards

These cards are an excellent choice if you enjoy collecting rewards for your regular purchases. With every purchase you make using these cards, you can accrue points, cashback, airline miles, or other exciting rewards. Certain cards additionally provide extra benefits for particular categories like dining, groceries, or gas.

Rates on Credit Cards in UAE?

Using a credit card involves an interest factor attached to it which is to be repaid along with the principal amount. Many people try to avoid the usage of credit cards due to the interest factor, but in the UAE you need not pay even a Dirham if you pay your full bill timely. In the UAE interest rate is charged when you fail to pay the full amount.

Credit Card Fees and Charges

There are other fees which is required to be paid in order to use credit cards in the UAE:

Annual Fees

Credit cards issued in the UAE usually charge an annual fee for card usage. However, there are some cards which do not charge any fee based on your spending pattern.

Late Payment Fees

Failing to pay your credit card bill leads to the imposition of late payment fees. Thus, to avoid late payment fees you need to pay your bills on time.

Conclusion

For someone with no experience, navigating the credit card market in the United Arab Emirates can be exciting and difficult. You can take advantage of these financial tools and protect your financial well-being by learning about the different kinds of credit cards, becoming familiar with terms and fees, and developing responsible credit habits. Recall that a credit card is a tool, and how you utilize it will determine how it affects your financial situation. You can take advantage of credit cards in the UAE and create the foundation for a safe and successful financial future by having the appropriate information and habits. My BANKER helps you save your time and efforts involved during issuance of credit cards. For any queries, mail us at service@my-banker.com.