<em>I work as a document controller in the construction sector in Dubai earning Dh5,000 a month. In January I missed my Dh1,100 credit card payment because of financial difficulties. Then last month the bank deducted the missed payment as well as the February payment, which meant I paid Dh2,300. Is it legal for a bank to do this? Normally, I have to authorise any amount that can be deducted from my account.</em> <em>The outstanding amount to the card is Dh20,000 with Dh1,100 taken per month. This credit card is linked to a loan I had before but I have already paid off the loan. My only outstanding debt is this credit card.</em> <em>I have asked the bank to restructure my credit card but they say they cannot do this because of the missed payments. However, I am missing payments because they take almost half my salary whenever I fail to meet my monthly dues. As well as missing the January payment, I also failed to meet the payment twice last year.</em> <em>I used the money to pay for my children’s college fees. I am a single mother from the Philippines and my monthly expenses come to Dh3,400 and include Dh1,200 for rent, Dh300 for utility bills, Dh400 for transport, Dh500 for food and Dh1,000 for remittances.</em> <em>Can the bank take two payments in one go if I miss one? And can they take the money from my bank account without my consent? How can I handle this as my finances are always on the rocky side?</em> <strong>JT, Dubai</strong> It is good that you are being conscientious about your finances and expenses, and proactively seeking guidance to manage them well. I would suggest that you request a meeting with the bank to review their credit card terms and conditions and get a clearer understanding of their policies. I would also recommend that you discuss the possibility of restructuring your credit card debt into a personal loan. The fact that you are currently employed, your salary is being transferred to the bank regularly and you have no other outstanding dues are all positive factors towards your request to restructure. The conversion to a personal loan would allow you to significantly lower your monthly instalment obligations and help manage your payments better. You could also explore this option with other banks. Like most other cardholders you probably don't remember having given permission to the bank to deduct more than one minimum payment from your bank account. However, when you signed on the dotted line in your credit card application form, you agreed to abide by the bank's terms and conditions. One of these terms involves a standard practice, wherein credit card providers roll over one month's unpaid minimum amount due to the following month. You'll find that most banks mention this in the fine print of the credit card agreement. Add to that the late payment fee levied by the bank, and you will see your overall outstanding balance and minimum repayments rise steadily. Missing minimum payments will make a big dent in your credit score as well. That's exactly why it is recommended that cardholders never miss the minimum payment on their credit cards. It would be a good idea to approach the bank once more (either on your own or through a debt counselling or debt management company) to request for your credit card debt to be restructured. Explain to them that you are facing genuine financial hardship, and will not be able to keep up with repayments if your debt keeps on increasing due to heavy interest payments.It is also important to understand here that credit card providers hold the legal 'right to set off', as mentioned in the credit card terms and conditions. This gives a bank the right to transfer funds from the account you hold with them to set off unpaid debt on one or more credit cards held with them. This is a debt recovery measure employed by banks to safeguard themselves against debt default. The real problem is that your finances are "always on the rocky side". Of course, it’s not easy being a single mother living on Dh5,000 in Dubai. You have to find a way to climb back on top of your finances, for your children’s future and for your sanity. Ultimately you are not in too bad shape, in terms of overall debt. You only have one outstanding debt, having paid off your loan. You now have three priorities: fix your debt problem, earn more money and reduce your expenses. Once you miss a payment, you don’t have a say over how the bank’s ability to recover money from your account. You contracted to pay them and you didn’t. So you must try very hard not to miss a payment, because it will make the next month doubly hard. Try to track your cash flow so you know what is coming in and out on each day of the month and how that affects your bank balance. Then you will know exactly how much you need to find before your card payment is due. You could try to ask your bank for a payment holiday if you are having a particularly tough month, but don’t expect to be able to do this easily or more than once. If you have a good month, pay some extra debt off or build a spare buffer of cash so you can always make your minimum payment. Some banks refuse to restructure debt because people haven’t missed any payments yet and now your bank is refusing because you have. Try to find someone in a branch or head office that you can talk to in person and go with a clear plan of your finances and how you could pay off the card. Because your salary is below Dh8,000, you may struggle to get a consolidation loan, but it might be worth talking to other banks in case they will give you a loan at a cheaper interest rate in exchange for moving your salary to them. In discussions with your bank, tell them that if you can’t reach an agreement you will go to the court and apply for insolvency proceedings. If you do this, the bank will be forced to agree a plan with you through an intermediary expert. This may be your best option if you simply cannot keep up payments, though try to improve your finances first. While jobs are not plentiful these days, keep an eye out for better paid jobs at your company or elsewhere. Ask your boss if there is any extra work you can do. See if your friends, neighbours or other contacts need any tasks doing that will contribute some money, using your skills as a document controller. At the same time, see if there are ways to reduce your expenses. This won’t be easy, but every additional amount you can save towards paying your debt off will stop it growing. Make a list of 20 ways you could save money and, even if only five are realistic, this process will help you gain more control over your finances. <em>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 pf@thenational.ae</em>
