Credit cards come with various charges and terms and conditions. Selecting a credit card in UAE is not as difficult as it sounds. Despite various charges, the advantages of a credit card are plenty. The credit limit allows cardholders to spend like never before. Credit card rewards include everything from discounts on dining to travel and the convenience of having a globally accepted form of currency is staggering in itself.
The security and reliability of modern banking also encourage accountholders to opt for a credit card in UAE. The presence of dozens of banks, both local and international and a thoroughly monitored, transparent banking process has made credit card shopping today as safe as (if not safer than) using cash.
Regardless of all these measures, cardholders are often surprised to find their monthly credit card statement tacked on with additional fees and charges that seem to appear out of nowhere. This common occurrence suggests that there is a clear gap in what the credit cardholder thinks he signed up for and what he actually signed up for.
In this article, we will clarify some of the most commonly ignored credit card fees and charges.
1. Annual Membership Fee:
Don’t jump at the sight of a no-fee credit card without carefully reading all the applicable conditions. Many credit cards in UAE offer a waiver on the first year’s annual membership fee. The fee is applicable from the second year onwards. Similarly, some of the best credit cards in UAE offer a complete waiver of the annual fee on condition that the cardholder spends a minimum yearly amount through the credit card. Read the credit card terms and conditions policy carefully and then opt for a card.
2. Cash Advance Fees:
- Cash advance refers to the amount of money withdrawn using a credit card. These funds are withdrawn from the cardholder’s available credit limit. The cash advance feature is a tricky concept, as it is further split into two charges:
- First is the cash advance transaction fee. This is a one-time fee that is charged every time the credit card is used to withdraw money. A cash advance transaction fee is usually a pre-decided percentage of the total withdrawn amount. The minimum or maximum limits on the transaction fee are set as per the bank’s discretion.
- The cash advance credit card charge comes in the form of a cash advance interest. The cash advance interest is calculated from the day the money is withdrawn and keeps accumulating until the cardholder pays their credit card bill. As compared to most countries, credit cards in UAE attract high cash advance interests. This is what makes credit cards a not so good option for withdrawing cash.
3. Foreign Transaction Charges:
You will often see credit card issuers advertising their cards as the ‘best credit cards in UAE’. Most of the best cards in the UAE come with global acceptance in various nations. What isn’t advertised is the steep credit card charge(s) on such international transactions. These credit card charges may be levied in the following manner:
- A flat transaction fee for every international purchase made with the credit card.
- A less than ideal currency conversion rate for every international purchase made in local currency, i.e. for international purchases made in AED. These conversion rates are often exaggerated, further raising the total cost of purchase.
Many credit cards in Dubai offer a travel line of cards that have no foreign transaction fees. For individuals who travel a lot, it is advised to opt for travel credit card and to also make payments in the foreign currency itself.
4. Balance Transfer Charges:
Some of the best credit cards in UAE come with 0% interest on balance transfer. Lured by the offer, most credit card applicants often fail to notice the one-time processing fee charged with such cards. While these 0% balance transfer cards are extremely helpful for a credit cardholder to clear up their credit card debt, the transfer processing fee adds a considerable expense that should be accounted for. These processing fees can be as high as 3% of the total transferred amount.
5. Credit Insurance Charges:
Many credit cards in UAE automatically enrol the cardholder into an insurance plan known as Credit Shield. The Credit Shield program cover the outstanding payment of the cardholder in the case they are injured, lose employment, contract/develop severe disease or in the event of death.
The reason why most cardholders are unaware of the Credit Shield charge is that it is automatically applied unless the credit card member specifically requests to opt out of it. Some banks even offer Credit Shield free of charge for the first month or two. In the subsequent month, the applicable charges are a complete surprise for the cardholder. Credit Shield charges can be as high as 0.99% of the credit card’s outstanding balance.
6. Additional Charges:
Some credit card spending categories attract additional charges. For example, certain banks charge a surcharge cost on fuel expenditures. Similarly, retail side markups are also fairly common in stores such as those of jewellers, who may charge as much as 2.5% of the transaction amount for purchases made with a credit card.
Over to you
Simply identifying the best credit card in UAE is not enough. It is just as important to read the fine print of your credit card terms and conditions and clarify all your queries (if any). Be sure to talk to a credit card representative from your bank and go over all applicable fees and charges to prevent unwelcome surprises.