Understanding the Average Credit Card Interest Rate in UAE

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In the dynamic financial landscape of the United Arab Emirates (UAE), it’s important to understand the nuances of credit card usage. One key factor that significantly impacts the financial choices of UAE residents is the average credit card interest rate. This crucial metric plays a crucial role in shaping the economic decisions of individuals and businesses alike.

Whether you're a seasoned credit card user, a budding entrepreneur, or simply someone curious about financial trends, diving into the intricacies of credit card interest rates in the UAE is essential.

In this article, we will explore the current scenario of credit card interest rates, deciphering how to reduce your credit card interest rate and other related aspects.

When is the Interest Rate Charged on the Credit Card?

You only have to pay interest on your credit card when you've gone past the interest-free period or turned your remaining balance into monthly instalments. Here are the situations where you will be charged interest -

  • If you don't make any payments in a month, the bank will start charging you interest on the full amount you owe. They will also charge interest on any new purchases from the day you make them till you clear your old balances.
  • If you pay just the minimum amount due, the bank will still charge you interest on the outstanding balance from the date on which you made the purchase till you've paid off all your previous debts.
  • If you decide to pay less than the minimum amount due, you'll be charged interest on the entire purchase amount from the date on which you made it. Plus, any new purchases will also accumulate interest until you've paid off all your old debts.
  • When you take out cash using your credit card (called a cash advance), the concerned bank will charge you interest from the day you withdraw the money until you pay it all back. Cash advance interest rates are usually high, and there's no interest-free period for this type of transaction.
  • If you carry over any unpaid balance from one billing cycle to the next, the bank will charge you interest on that balance, whether you choose to pay the minimum due amount or not. New transactions will also accrue interest until you've paid off all your previous balances.

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How is Credit Card Interest Rate Computed in the UAE?

Interest calculations on credit cards work a bit differently compared to other types of credit such as loans. Instead of applying the finance charges that you see when you apply for a credit card every month, credit card rates are calculated at the end of each billing cycle using something called the Monthly Percentage Rate (MPR).

With that said, banks and financial institutions determine the actual interest rate for your credit card over the course of a year. This is called the Annual Percentage Rate (APR). The MPR and APR can vary depending on the bank and the specific credit card you're interested in.

So when you're thinking about getting a credit card, it's important to check not only the finance charges but also the APR and MPR to understand how much it will cost you in the long run.

Interest Rates for the Top Credit Card in the UAE

Interest rates on credit cards in the UAE are usually higher than in several other countries in the world. So while you are told about the interest rate each month, when you add it up for a year, it's really high.

For instance, if your card has a 3% monthly interest rate, your yearly interest rate would be 36% (12 times 3). Typically, credit cards in the UAE charge a monthly interest rate of 2.5% to 3%.

Listed below are the top credit cards and their interest rates in the UAE:

Credit Card Interest Rate
Citibank Citi Cash Back Credit Card 3.25% per month
Citibank Citi Simplicity Credit Card 3.5% per month
Emirates NBD Liv. Platinum Credit Card 3.25% per month
Emirates NBD Liv. World Credit Card 3.09% per month
Commercial Bank of Dubai Titanium MasterCard Credit Card 3.45% per month
Emirates NBD Lulu 24/7 Titanium Credit Card 3.25% per month
Emirates Islamic RTA Credit Card 3.49% per month
Commercial Bank of Dubai Super Saver Credit Card
  • 3.45% per month
  • 1.5% per month (for CBD Private Banking Customers only)
Emirates Islamic Etihad Guest Platinum Credit Card 3.49% per month
ADCB 365 Cashback Credit Card 3.69% per month

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How Does Credit Score Impact the Credit Card Interest Rates?

A higher credit score can make it easier for you to get lower interest rates on credit cards, loans, and other types of borrowing. This can ultimately save you money. Conversely, having a bad credit score suggests more risk for the credit card company, which often results in higher APRs (annual percentage rates) for you as a cardholder.

Interest rates on credit cards can vary between companies and even among different cardholders. The type of credit card you choose can also affect your APR. For instance, rewards credit cards may have higher interest rates compared to other types.

By multiplying the above-mentioned figures by 12, you can have a rough idea of the APR range you might come across with a general-purpose credit card as per your credit score. However, always check with the specific credit card issuer to know the exact rates they offer on the account you're interested in.

Tips and Tricks to Reduce Interest Rate on Credit Cards

If you're trying to pay off your credit card debt, getting a lower interest rate can help you save money and become debt-free faster. Here are some easy ways to try and reduce your credit card's interest rate -

  • Balance Transfer - You can consider opening a new credit card with a special offer of a low or even 0% interest rate for transferring your existing balance. Keep in mind that these low rates usually last for about 12 to 18 months. If you can aggressively pay down your debt during this period, it can significantly reduce what you owe.
  • Consolidation Loan - Another option to pay off your credit card debt is to take out a new loan with a lower interest rate. Whether you qualify for this depends on your credit score, income, and other factors. A low-interest consolidation loan can save you money and speed up your debt repayment. It might also improve your credit score by changing your credit card utilisation.
  • Talk to Your Credit Card Company - Credit cards’ interest rates aren't set in stone. You can ask your credit card company if they'd consider lowering it. Sometimes, they might agree, especially if you've been a responsible customer with a good payment history (it can also help if you mention that you've seen other credit card offers with lower rates!).

Frequently Asked Questions

Q1. Do credit card interest rates change often?

Ans: Credit card interest rates are determined by the credit card bank provider. They have the authority to change interest rates with prior notice to the credit card holder.

Q2. Why is credit card interest rate higher than the interest rate for other credit facilities?

Ans: Since credit cards provide an immediate loan up to your credit limit without any approval, they tend to have a high interest rate. However, this interest is only charged if you fail to pay your credit card bill in full on time.

Q3. Can you repay your credit card dues in instalments?

Ans: Several credit card companies offer straightforward plans to help you split big purchases into smaller monthly payments. However, keep in mind that you'll have to pay the interest rates set by your bank.

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