The Debt Panel: 'I didn't activate a credit card but was charged annual fees'

The Dubai resident owes more than $500 and has been flagged as a defaulter on his credit report

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In the third quarter of 2019, I signed up for a credit card with a local bank. At the time, the bank’s agent assured me that the card did not have an annual fee.

However, after I received the card and read the attached information, I discovered that the card charged an annual fee of Dh200. Therefore, I did not activate the card and never used it.

I have recently been receiving emailed monthly statements from the bank and when I called them, was surprised to discover that I owed more than Dh2,000 ($544.58) on the card.

The bank’s agent said he had applied to cancel the card on my behalf, but this would take 45 days and somebody from the payments department would call me.

However, I have not heard from them yet. Obviously, the longer this drags on, the penalties will increase and the amount owed will grow quickly.

Furthermore, I have also been flagged as a defaulter on my Al Etihad Credit Bureau credit report. I discovered this when I applied for a loan, which was consequently rejected.

Can you advise me on what I should do and what my legal rights are regarding this issue? LB, Dubai

Debt panellist 1: Sameh Awadallah, acting global head of retail banking at Abu Dhabi Islamic Bank

Your decision not to activate your credit card and use it is not the solution as it can lead to you paying fees without reaping any of your cardholder benefits.

Your account is automatically opened when your application is approved. This means that even if you do not activate the credit card, you will still have to pay the annual fee associated with it.

Given your situation, I would recommend setting up an in-person meeting with a senior officer at the bank and explain your situation to them. As it is not a huge amount and if you are an existing customer of the bank, you can ask them to waive the annual fees that have accumulated so far.

You could then ask to switch to another card from the same issuer that does not charge an annual fee. This may be less of a hassle for you than cancelling your card and applying for a new one with a different issuer.

Once the settlement is completed, ask the bank to remove the default status and amend the original credit information provided to the AECB.

The bank can correct and update their records instantly through the data correction tool provided by AECB.

There is a link on AECB’s website that allows you to contact your bank (information provider). If you can convince the bank to do this, make sure the agreement is in writing.

I also suggest obtaining both the clearance letter and the agreement in writing, on the bank's letterhead, to amend the write-off status.

Debt panellist 2: Jaya Ratnani, managing partner at Freed Financial Services

Quite often, people have small, unknown defaults and payments piling up on their credit cards, which go unnoticed over a period of time. This amount grows due to penalties and interest and can have an adverse impact on an AECB credit report.

It is frustrating when you have been rejected for a loan with a bank for such a reason. The cancellation of the credit card and non-reversal of the annual fees charged by the bank can be due to either a system error or an internal miscommunication by departments within the bank.

The first step is to resolve this issue by communicating with the bank and requesting a waiver of all the charges.

In the event that there is no action taken by the bank, a complaint can be lodged through its online complaint portal or by email. Attaching any supporting documents to prove your argument should be submitted at this stage.

It may have been a one-year promotional offer the bank was running to encourage people to sign up for the credit card.
Alison Soltani, founder of Leap Savvy Savers

If the bank does not take any action for the next 30 days, you can raise a complaint with the UAE Central Bank through its website. You will need to attach the supporting documents and the complaint reference number from your bank.

Once the case is resolved with the bank, request a no-liability letter. The bank should notify the AECB in its monthly report about the closure of the card. When AECB receives rectified data, it will update your credit report, which will lead to a change in your credit score.

Make sure to review your AECB credit score after 30 to 45 days to ensure that the default has been removed and the score is updated.

Meanwhile, if you are applying for a loan, you can provide the justification to the bank about these charges and the credit evaluation team can consider your case for approval.

Alternatively, you can wait for the AECB report to reflect the closure of the account and reapply for a loan.

Debt panellist 3: Alison Soltani, founder of Leap Savvy Savers

I am sorry to hear of your predicament — it is frustrating to realise that fees were accruing, unbeknown to you, on a credit card that you were not using.

It may have been a one-year promotional offer the bank was running to encourage people to sign up for the credit card, and they might not have explicitly confirmed that the fee would be applied after the offer period expired.

It is worth asking any agents, companies, financial institutions or banks to outline all fees associated with their financial products in writing before you sign up.

Despite the fact that you did not activate the card, you are still liable for the fee unless you cancel it with the bank.

The Dh2,000 will, in all likelihood, be the annual fee plus any interest and late charges accruing on the account. This will definitely affect your credit score and is most likely the reason your loan application was rejected.

You can file a complaint against the agent — for not informing you about the fee — with the bank’s relationship manager and with the central bank by filling in the form on its website or by calling 800 22 823.

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It may help your case if you have any written evidence, such as a message or email, which suggests that the credit card did not carry a fee.

Unfortunately, if the interactions were solely verbal, your complaint may not be upheld as the bank sent you paperwork with the card, which informed you of the fee. I would also check whether the fee is listed in any documents that you signed when you applied for the card.

If you wish to improve your credit score, frustrating as it may be, the best course of action would be to clear the Dh2,000 charge as soon as possible. Although your score will immediately reflect this, it will take time to recover to a point in which you will be able to apply for credit.

In the meantime, there are actions you can take to expedite your improved credit score.

Ensure all bills, fees and loan payments are made on time. Also, limit the number of accounts, cards and loan applications you make in a short time frame.

Additionally, do not use the maximum amount of any existing credit you have. For example, if you have a credit card with a Dh10,000 limit, it will be to your advantage if you use Dh3,000 to Dh4,000 per month and pay it off in full.

You could also request to become an authorised user on a fiscally responsible partner’s card, which will also positively affect your credit report.

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

Updated: May 25, 2022, 5:00 AM