The Debt Panel: 'I've repaid my credit card for two years but the balance barely reduces'

The Abu Dhabi resident, from Uganda, wants to convert the debt into a loan with a fixed payment

Ilustration by Alex Belman

About two years ago I maxed out my credit card limit at Dh37,000 paying medical bills for my wife’s surgery. I have since struggled to bring the outstanding balance to Dh17,000. Due to stringent financial constraints, I find it difficult to pay more than the minimum payment of Dh950 which only caters for the interest. I also have a personal loan with another bank, which has an outstanding balance of Dh75,000. I earn Dh6,500 working in sales for the airline industry, with some incentives once in a while. My monthly expenses are:

Rent: Dh1,500

Groceries: Dh500

Transport: Dh300

Loan repayment: Dh2,000

Credit card repayment: Dh950

Total: Dh5,250

Is there an option to convert the credit card balance into a loan and have a fixed payment until I close it? I can continue to pay about Dh900 a month, but I need the outstanding balance to be reduced to be manageable. I am from Uganda and have never defaulted on my debts, as this is exactly what I am trying to avoid.

EK, Abu Dhabi

Debt Panellist 1: Ambareen Musa, founder and chief executive of

Since your debt-to-income ratio (DBR) is not incredibly high, you can explore the loan consolidation option. Get in touch with your primary bank first and ask them to consolidate your personal loan and outstanding credit card balance. Debt consolidation will allow you to take advantage of a lower interest rate, as well as an extended loan tenure. Essentially, it would make your monthly debt commitments more manageable.

If your primary bank rejects the debt consolidation application, approach other banks that offer this facility. Be prepared to transfer your salary to the new lender as this is a primary requirement for all debt consolidation cases.

If, for any reason, loan consolidation doesn't work out, your goal should be to first minimise the interest drain on your credit card debt. This type of debt accumulates very fast, due to the high interest rates on credit cards in the UAE, averaging close to 40 per cent annually.

Regarding your question about converting your credit card balance into a loan, the answer is yes. You can definitely request your bank to convert the outstanding balance into a fixed-interest loan with fixed monthly installments. You can negotiate with the bank to lower the interest charged on this loan and to offer a tenure that suits you.

If you can, try to find a way to pay off the entire credit card balance right away. This might be easier said than done, but it can improve your long-term financial situation drastically. Explore options like getting an interest-free loan from close relatives or a few months' advance salary from your employer. If there are any savings that you can tap into, you can use the additional money to pay off the high-interest debt sooner.

Your present financial situation also requires you to make major cutbacks in your monthly budget. Go over your monthly expenses to see where you can save, and cut all unnecessary expenditure. Stick to the bare minimum and use a chunk of your income to pay off your debt.


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Debt panellist 2: Kunal Malani, head of customer value management at HSBC

It is encouraging to see you are not running away from your responsibilities and I must commend your efforts to remain on top of your monthly obligations.

Whenever circumstances evolve it is always best to contact your bank immediately to discuss the situation and together work on a suitable repayment arrangement.

The option you are already considering around credit card versus loans is the right way to think.

Interest rates on personal loans tend to be much lower than the annual percentage rate on credit cards.

Looking at your outstanding dues and the ongoing monthly expenses, a suitable solution for you to consider is consolidating your debt into manageable monthly payments.

Your first port of call should be the bank you have the loan with. Speak to them about bringing together the Dh17,000 outstanding on your card and the Dh75,000 on your loan. The combined loan is likely to be well within the 20-times salary cap set by the Central Bank of the UAE. To better manage your DBR, you may want to opt for a longer tenure on your loan; the maximum offered by most banks is four years.

Repayments on a personal loan are likely to help in reducing your debt, rather than just paying off interest – which should give you some respite from a debt spiral.

If possible, you may consider arranging to dispose of any personal assets you might have either here or back home in Uganda to help contribute to repaying your obligations.

Also, to avoid further debt escalation think about lowering the limits on your credit card.


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Debt Panellist 3: Rasheda Khatun Khan, a wealth and wellness planner and founder of Design your Life

Managing to keep up your repayments is only deferring getting out of debt and into building savings. You have done well to reduce the balance on your credit card by half. Converting the balance to a loan is your best option and very possible. First, approach the bank the card is with and request this option. Be sure to understand the terms of the loan. This means knowing the interest rate, the term and any other fees. Try your main bank too if it's a different bank and compare options.

What's equally important in this strategy is curbing your monthly expenses. Unfortunately emergency expenses come up from time to time and are just part of normal life. This means we have to anticipate them by building a reserve fund and calling it your emergency fund. This way you will not need to use your credit card to pay for such expenses. Aim to build up your emergency fund to two to three months of your income.

If your personal loan has been also as a result of emergency or general living expenses, you need to start exploring options to increase your income. Find a way to exceed your sales objectives and increase your incentives and bonuses. Ask for a pay rise or look for another opportunity. Increasing your income will be essential if you want to continue living here. If you constantly struggle to meet expenses when your income has run out, you will always find yourself increasing your credit card balance.

Finally, if you have any assets, sell them. Try to reduce your credit card balance as much as possible. To get out of the cycle of debt once and for all, you must work on consolidating, reducing your expenses and increasing your income.

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