The Debt Panel: 'I can't control my spending and owe Dh50,000 on credit cards'

The Dubai resident is hiding purchases from her husband and only paying the minimum amount off each month

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I have been married for five years. After coming to Dubai, I became a compulsive spender because the malls always have attractive offers. However, I have developed a habit of hiding my purchases from my husband. He is a saver and I am a spender.

I use buy-now-pay-later platforms and credit cards to buy items and conceal them from my husband because I worry about the repercussions. I work, so am able to sustain my spending but I want to come clean with my husband about my spending habits.

I have racked up about Dh50,000 in credit card debt without my husband's knowledge. I earn a salary of Dh11,000 a month and am finding it hard to control my expenses. I roll over the card debt and pay the minimum balance each month because I do not understand how a credit card works. Can you advise me on what I should do? NS, Dubai

Debt panellist 1: R Sivaram, executive vice president and head of retail banking products at Emirates NBD

It is very important for you to take stock not only of your current financial situation, but also the kind of choices you are making regarding your lifestyle. You should also understand how to use a financial product responsibly as it can lead to unwanted repercussions.

A credit card is a financial tool that can help you to manage your daily payments and transactions conveniently, have access to short-term credit, avail attractive shopping deals and discount programmes, as well as earn rewards based on your spending.

However, if your credit card spending is out of control, monthly payments and accumulated interest can also increase and lead to potential financial problems.

Paying only the minimum amount required every month is a common practice adopted by many cardholders. However, bear in mind that this can also result in the debt continuing to grow due to compounding interest charges, leading to larger regular payments needed and the threat of falling into a debt spiral.

With reference to your situation, one thing you can do immediately is speak to your bank and share full details of your financial position. Based on your proactive approach, your bank will probably be open to reviewing the situation and possibly consolidate your outstanding debt into a personal loan with a lower interest rate and a longer payment term.

The bank may also want you to surrender your credit cards to prevent you from incurring further debt while you pay off the loan. If you have credit cards with another bank, then you should also stop using these during this time.

A good alternative is to use debit cards, which are a great mechanism to manage your spending without having to use credit.

It is important to work on a budgeting plan and set aside a monthly limit on your discretionary spending outside of basic essentials such as groceries, utilities, school fees and others.

Try to foster a habit of putting a percentage of your earnings aside as savings to help you on a "rainy day" – as the saying goes: pay yourself first before taking care of your monthly expenses.

It may not be easy to suddenly change your financial habits overnight and it may be helpful to have your spouse or a friend who can help you work through this situation in the coming months.

It is commendable that you are reaching out for assistance with your situation to put in place changes before it is too late. I wish you all the best in arriving at a positive solution with your bank, as well as making the required changes with your budgeting and spending.

Debt panellist 2: Nathan McFarlane, founder of AskHelpWith.com

Who doesn’t love to go shopping once in a while? I know I do. However, compulsive spending, particularly above your means, is a not a good idea.

Hiding your spending habits and financials from your husband is even more of a bad idea. Taking on high interest debt to fund your spending sprees is also a serious issue and your actions are compounding your problem.

It is only a matter of time before you find yourself in real difficulty – and will be unable to hide this from your husband any more. I suggest you stop the high-interest debt immediately and discuss your spending habits with your spouse.

It is important to work on a budgeting plan and set aside a monthly limit on your discretionary spending outside of basic essentials such as groceries, utilities, school fees and others

R Sivaram,
executive vice president and head of retail banking products at Emirates NBD

Making only the minimum payment on your credit card every month means the debt will take years to pay off because of compounding interest. You need to start paying more than the minimum amount on the card as soon as possible to bring it down.

One suggestion is to discuss with your husband the possibility of him taking control of your cards as it sounds as though he is more savvy when it comes to saving and finances.

The bank may have alternative options for you, such as surrendering the cards and restructuring the debt into a loan that will have far lower interest rates than what you are currently paying. If you are worried about speaking to your husband, this may well be a step in the right direction.

Debt panellist 3: Jaya Ratnani, managing partner at Freed Financial Services

We all have aspirations and desires of the kind of lifestyle we want to achieve. While not everything can be quantified in terms of money, many of the lifestyle decisions that we make have financial implications.

This is usually constructive as it motivates us to work harder and have greater ambition. However, in certain scenarios, it can lead some astray financially and result in excessive debt that is beyond their ability to repay. This can be through excessive bank loans and the use of credit cards to maintain a high-end lifestyle.

Not only does this affect people financially, it can also take a toll emotionally. But what is most important is to be calm and evaluate the best approach.

Firstly, you need to calculate your personal debt-to-income ratio. This will help you understand how much of your debt obligations can be funded through your regular income.

A healthy ratio should stay under 30 per cent to 40 per cent. Unsecured loans such as credit cards carry a very high rate of interest. Making a monthly minimum payment is not a good option as it continues to increase the outstanding principal and interest.

It is recommended to consolidate your debt in the form of a single payment. If you have a salary account with a bank, it can help you to consolidate your debts.

The advantage of consolidation is that you deal only with one institution, making it easier to better track how much you owe to a single entity. You can opt for salary-transfer finance from your primary bank, which also comes with a much lower interest rate compared with other loans and credit cards.

The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to [e-mail]