Counting the cost of personal debt in the UAE

The National asked six people if they what knew their credit card's interest rate is. Only one person had the correct answer, which backs up a recent study that nearly two-thirds of UAE cardholders are unaware of their rate.

According to a recent survey, about two-thirds of credit card holders are unaware of their card’s interest rate. Jaime Puebla / The National
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Mithun wrote of his Dh100,000 credit card debt; Matthew from Dubai has five cards and pays Dh5,500 a month in instalments from a salary of Dh8,000; Carl has a card debt of Dh270,000, with a salary of just Dh19,000 a month.

They are among hundreds of readers that have written to The National to share their financial woes, following a series of articles in the Money section about worrying levels of personal debt in the UAE.

But how are UAE residents building up such alarming liabilities? One reason is the lack of knowledge about the sky-high credit card interest rates in the country.

According to a recent survey, about two-thirds of credit card holders are unaware of their card’s interest rate.

The National asked six random people – who held a total of 14 cards between them – to see if they actually knew their card's magic number. Only one person had the correct answer.

In the UAE, the average credit card rate currently stands at 2.83 per cent, according to comparison site But wait, that is only per month. Elsewhere, by law the rate is quoted as an annual percentage rate (APR) to make comparison easier and to account for fees and compound interest.

Take that 2.83 per cent, calculate it annually and the cost of borrowing on your plastic hits 39.78 per cent, compared to a typical APR of 17.93 per cent in the UK and 13.93 per cent in the US.

The most expensive cards on the market, such as Standard Chartered Titanium, Mashreq SmartSaver and Emirates Islamic Easy, come in at 3.25 per cent, or 46.78 per cent annually.

But why are rates so high? Jon Richards, the founder and chief executive of the comparison site, says: “The bulk of the population is perceived as being transient and, by implication, difficult to pursue in cases of default. The additional risk has to be factored in.

“Also the fact that debt is a criminal offence encourages banks to show great largesse in handing out credit cards, with little money spent by them or the regulatory authorities in educating the public on maintaining an affordable lifestyle.”

A recent National Bonds survey found that more than a third of residents pay off credit card debt each month, while half were also paying off loans. In 2013 the UAE Central Bank decreed that for borrowing the debt burden ratio – the cost of repayments against all of a consumer’s borrowing, as a percentage of their monthly salary – should not exceed 50 per cent.

Suvo Sarkar, Emirates NBD’s senior executive vice president and group head of retail banking and wealth management, says customers today have a “heightened awareness” of credit card rates, with “adequate information available in the public domain”, such as on financial comparison sites.

“The introduction of Al Etihad Credit Bureau has made customers more sensitised to their financial commitments and in managing their debt judiciously,” he says. Yet in a survey, 28 per cent of credit card holders did not understand that missing a repayment could affect their borrowing ability in the future.

It does not help that most bank websites do not advertise their credit card rates, and only a percentage of consumers will, in any case, qualify for the attractive headline rates quoted in adverts and leaflets.

Mr Richards says: “Consumers can and should avoid expensive forms of finance by educating themselves on the true cost of borrowing and alternatives. Understanding terms and conditions is vital to your financial health. I urge credit card users to swipe them responsibly. The alternative is excessive monthly payments that can quickly become unmanageable.”

He also believes regulation with “real bite” is required to “protect the more vulnerable members of society”.

That is people such as Mithun, who did not want to be named but wrote into The National about his plight. He has six credit cards carrying a debt of Dh101,000, as well as five loans with about another Dh160,000 of debt. His minimum repayments each month on the credit cards total more than Dh26,000, with another Dh8,000 to pay on loans.

But he lost his job six months ago and, although he now has another, his salary has dropped from Dh15,000 to Dh11,000. With a debt-burden ratio (DBR) of 229 per cent, no bank will offer him a consolidation loan.

For Matthew from Dubai, his DBR is about 69 per cent, compared to the 50 per cent now allowed. And Carl has loan debt of Dh400,000 on top of the Dh270,000 he owes on his credit cards. Although he does not mention his monthly repayments, The National estimates his DBR to be coming up to 500 per cent. “All of my money goes towards minimum payments and I cannot support my family,” he says.

The Department of Economic Development says it wants to make customers “smart enough to protect themselves” when it comes to credit cards, but that they also have “an obligation to know the information”.

Mohammed Lootah, the executive director of commercial compliance and consumer protection, says: “This is the country in the region with the highest credit card payments. Our job is to teach the consumer to teach themselves.

“If you ask people what their telecoms package is, they know the dirham cost per month and the gigabytes they get, because it is important to them. But they sign a universal contract for a credit card that also says everything. If the consumer does not want to read it, they cannot blame the provider.

“It’s like learning the nutrition facts of food – what is your interest, the instalments, the grace period, what offers do you get on your card? Compare products. And do you really need it? Make a product work in your favour. We need to elevate knowledge.”

Mr Sarkar says Emirates NBD is building financial literacy into its website and social-media channels and is the first bank to have introduced a corporate social responsibility campaign to “help customers take an informed decision on the need for borrowing money”.

He advises customers with credit card debt to look at a loan-on-card facility to reduce interest costs, convert outstanding card amounts to a lower interest instalment plan or seek out a consolidation loan.

It is also worth remembering that an Islamic credit card does not charge interest, as it is forbidden under the Shariah to do so. Instead, a flat fee is charged each month if the balance is not paid off in full.

And while you rue the rates here in the UAE, at least be grateful you are not in Brazil, where the interest rate has skyrocketed to 414 per cent per year.

Do you know your rates?

We asked six people – who held a total of 14 cards between them – to see if they knew what their credit card’s interest rate was. Here are their answers:

Mauro Scorza, Italian, 45

Business development manager for an industrial instrumentation supplier

“I believe I’m paying 12 per cent but I’m not sure, as I pay off 100 per cent of my bills each month. I have two cards – Citibank and Samba. If I needed money, I would go for a loan at a good rate rather than use a credit card.”

Actual rates:

Citibank Citi Premiermiles 2.99 per cent (42.41 per cent annually)

Samba Titanium Everyday 2.89 per cent (40.76 per cent annually)

Eman Khallouf, Jordanian, 35

Digital advertising director

“I’ve had my card four years but have never noticed or asked what the rate it. I think the bank told me some time but I never paid attention.”

Actual rate:

HSBC Platinum 2.99 per cent (42.41 per cent annually)

Maria Fernandez Reyes, Filipina, 35

Administrative assistant for a large digital company

“I think my rate is 3.25 per cent – I got this from the enclosed leaflet when they sent me the card last August. I have a good memory.”

Actual rate:

FGB Standard 3.25 per cent (46.78 per cent annually)

Rachel McArthur, British-Egyptian, 32


“I’ll guess 3.7 per cent but I have no clue even which card I have – Platinum? Just a standard one from years ago. I honestly have no idea what the interest rate is.”

Actual rate:

Emirates NBD Platinum 3.09 per cent (44.08 per cent annually)

Mark Miller, Australian, 28

IT manager

“I will guess at 3 per cent and 2 per cent respectively for my HSBC and ADCB cards – per month, not APR. Not that I ever leave a credit card debt long enough to actually know. Oh, I just checked – I was close on one and way off on the other.”

Actual rates:

HSBC Advance Platinum 2.99 per cent (42.41 per cent annually)

HSBC Platinum Select 2.99 per cent (42.41 per cent annually)

ADCB Touchpoints Gold 3.08 per cent (43.91 per cent annually)

Mithun M, Indian, 43

Sales manager

“I have six cards and I don’t know the rate on any of them, although I know their limits. I have Dh100,800 in debt on my cards, plus another Dh156,000 in loans.”

Actual rates:

Standard Chartered Infinite 2.99 per cent (42.41 per cent annually)

Dubai First Skyy Miles Exclusive Infinite 3.19 per cent (45.76 per cent annually)

RAKBank Titanium 3.19 per cent (45.76 per cent annually)

ADCB TouchPoints Titanium 3.09 per cent (44.08 per cent annually)

Najm Cashback Blue 2.99 per cent (42.41 per cent annually)

Mashreq Platinum Elite 2.99 per cent (42.41 per cent annually)

Read about the dangers of compound interest on your UAE credit card at

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