How your credit card can act as a financial safety net

Credit cards can help you stretch your dirham further through rewards, cashback and offers. Antonie Robertson / The National

As the cost of living edges higher and UAE residents look for smarter ways to manage day-to-day spending, credit cards are emerging as more than just a convenient means of payment – they’re becoming a gateway to savings, flexibility and better financial control.

Yet for many people, credit cards still come with a stigma: overspending, high interest rates, or a slippery slope into debt. While those risks are real, when used responsibly, credit cards can support financial goals rather than impede them, especially in a digital-first economy like the UAE.

Avoiding interest and late fees

The first step in using credit to your advantage is understanding the system: how billing cycles, grace periods and annual percentage rates (APR) work.

Each card operates on a billing cycle – usually 30 days – during which your balance can be paid without incurring interest. If you pay in full and on time, you avoid borrowing costs altogether.

The APR (often expressed as a monthly rate) shows the borrowing cost of your card, determined by your interest rate and standard fees. Late payments can increase your APR. Interest begins to accrue – usually calculated daily, which can catch people off guard. This means if a payment is overdue, interest must be paid on the outstanding balance, plus any accumulated interest.

Even if you’re only slightly late, it may not affect your credit score immediately, but you’ll likely incur penalties or fees. Many consumers pay just the minimum amount, and while it is always better to pay the minimum over nothing, over time, an outstanding balance can lead to a large debt or interest charges.

Paying your balance on time ensures you evade increased rates, improve your credit score, which can help you access banking services like loans.

Tip: Set up automated payments or calendar reminders to ensure you do not miss a due date.

Earn while you spend

Credit cards can also help you stretch your dirham further through rewards, cashback and offers. To optimise your rewards, choose a card that best aligns with your spending habits. Many banks provide cards designed to suit lifestyles – with benefits tied to fuel, groceries, travel, dining and even school fee payments.

Choosing the right card means knowing where your money goes each month. For example, a cashback card that rewards fuel purchases may suit someone with a long daily journey to and from work, while frequent travellers might benefit more from air miles or airport lounge access.

Tip: Understanding terms like spending caps, category limits, expiration rules, etc, is crucial to fully unlocking reward benefits. If there is any uncertainty regarding credit card reward programmes, it is always best to contact the bank directly for more information.

Instalments and balance transfers

Another advantage of credit cards lies in instalment plans and balance transfers. Many banks in the UAE allow big-ticket purchases to be converted into interest-free monthly instalments, helping consumers manage budgets without depleting savings.

Balance transfers, on the other hand, are ideal for those carrying outstanding credit card balances. Transferring the balance to a new card with lower or zero per cent interest (for a limited period) allows consumers to pay off debt more efficiently.

Some plans may charge an early repayment fee if you settle your balance before the agreed period. If you miss a payment during this promotion period, your interest rate will change to the original or a higher rate. Likewise, once the promotion period has passed, any pending balance will be charged at the original interest rate of the card.

If used effectively, balance transfer plans and instalment plans are great tools to help manage expenses.

Tip: Always read the fine print, including early repayment charges and post-promotion APRs.

Credit can help build, not just borrow

Credit cards are critical for building credit history and financial credibility. Timely payments help to strengthen your credit score – an important factor when applying for loans, leasing property, or accessing other financial products in the UAE.

Used wisely, a credit card can function as a financial safety net, helping you manage emergencies, plan big purchases, and unlock value through tailored rewards, all without compromising your financial health.

The key to credit card success isn’t avoidance – it’s awareness. By understanding how credit works and aligning your use with your personal goals and budget, you can turn your card into a valuable financial ally.

Kartik Taneja is head of payments and consumer lending at Mashreq