Nearly two thirds of credit card holders in the UAE have no idea what their credit card’s interest rate is.
This is according to a new survey from the finance comparison group, compareit4me.com.
It’s a worrying stat when you think there are about 5.9 million debit and credit cards in circulation in the UAE, according to Jon Richards, the company’s chief executive. That effectively means that the holders of 3.9 million of those cards have no idea what interest rate they pay on their outstanding balances.
It’s no wonder Mr Richards finds the results of the survey “alarming”.
Here at The National, we have received hundreds of letters from UAE residents struggling with escalating debts on loans and credit cards. I wonder how many of them know what their credit card interest rate is?
Interest rates on UAE credit cards are significantly higher than many countries and other types of debt, typically hovering around the 2.9 per cent per month mark. That’s equivalent to an annual rate of 41.1 per cent, when you factor in compound interest - that’s the interest charged on the initial principal and also on the accumulated interest.
More worrying, a credit card balance with an annual interest rate of 41.1 per cent will double every two years if the principal is not paid down.
I have a credit card and because it’s an Islamic card, there is no interest rate as such. Instead, I know I will be charged a fee of Dh600 if I do not pay off the balance in full.
Having that knowledge ensures I always do just that. After all, why would I want to hand over Dh600 of my hard-earned cash to my bank? I wouldn’t.
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