Everything you Must Know Before Getting a Credit Card
Introduced as a way to allow people to access their funds from anywhere across the globe, credit cards are undeniably one of the most powerful financial instruments in the world today. And the plethora of available credit card offers in Dubai would seem to suggest that most financial institutions agree with this sentiment. Yet despite their high saturation in the market, credit cards and their associated charges still present a puzzling concept that isn’t completely understood by cardholders, both new and experienced.
This quick-read guide is designed to help readers understand the modern credit card phenomenon and as a result, help them identify the top credit cards in UAE.
Credit Card Fundamentals
Various credit card offers in Dubai claim to have free for life cards with low interests and tons of benefits. But then, how would the credit card issuer make any profit? Such offers may seem too good to be true, and quite often they are. Let us take a look at the basic workings of some of the top credit cards in UAE, to better understand what a credit card is, how the cardholder is charged and what a fee-free credit card truly means.
Billing Cycles & Grace Periods
A credit card is a financial tool which gives the cardholder access to a pre-determined limit of funds. The cardholder is not required to maintain funds in their account. Instead, customers can use the card as long as they remain within the available credit limit and continue to repay the borrowed amounts. At the end of every billing cycle (which is typically 30 days), the cardholder is required to either pay off the entire borrowed amount or a make a minimum monthly payment. Credit card offers in Dubai often mention ‘grace periods’, which are quite simply the number of days the cardholder has to make their payments.
Note: Top credit cards in UAE can offer up to as much as 55 days of grace period.
Outstanding Balance & Minimum Monthly Payments
The outstanding balance on a credit card is the sum of any borrowed amount (the amount used to make purchases), accrued interest, fees and charges. The outstanding balance can either be paid off in its entirety at the end of a billing cycle or in the form of a minimum monthly payment. It is important to understand that while many credit card offers in Dubai ask for surprisingly low minimum payments, any outstanding balance will continue to gather interest.
Note: Top credit cards in UAE may ask for minimum monthly payments as low as 5% of the outstanding balance.
Retail & Cash Advance Interest
Interest is one of the major ways that credit card issuers make a profit. There are two forms of interest: retail and cash advance interest. Retail interest is calculated on any leftover balance amount at the end of a billing cycle. The only way to avoid retail interest is by paying off the total balance amount before the payment due date. Keep in mind that most credit card offers in Dubai only mention monthly interest rates, which is why they seem so low. Annually, these interest rates easily reach double-digit Cash advance interest, on the other hand, is calculated on any cash withdrawals made with the credit card. The cash advance interest rates are usually extremely high and also come coupled with a cash advance fee per transaction.
Note- Top credit cards in UAE charge anywhere between 2% - 3% monthly retail interest rates.
Annual Membership Fees & Charges
An annual membership fee may be thought of as a card maintenance fee. Some credit card variants charge no annual fee in the first year, while some are completely fee-free for life. However, regardless of whether or not a credit card charges an annual fee, it will undoubtedly carry interest and tack on charges for out of policy spending. So, instead of being swayed by fee-free credit card offers in Dubai, it is important to carefully read the card’s policy document for details on associated charges and interest rates.
Note: Top credit cards in UAE allow the cardholder to waive their annual membership fee by redeeming loyalty points, or by meeting a minimum spending requirement.
Picking a Credit Card
Now that the fundamentals of credit card spending have been cleared, it is time to pick the top credit cards in UAE. Here are some things to keep in mind when making a final decision.
- Spending Habits: More crucial than finding lucrative credit card offers in Dubai, is identifying one’s own spending habits. Credit cards offer a wide variety of benefits that seem attractive at first but often end up being unused due to out of sync spending habits. Customers should instead focus on charting out daily expenses and find an appropriate card based on the same.
- Eligibility: From credit history to monthly income, there is a long list of eligibility criteria that customers will need to qualify for before getting a credit card. Top credit cards in UAE typically carry higher minimum monthly requirements and offer bigger benefits in return.
- Compare: Rewards, fees, charges, interest rates and numerous other factors make finding the top credit cards in UAE a complicated task. But the availability of online credit card aggregators has helped make comparisons much more convenient.
Over to you
Be sure to compare the various credit card offers in Dubai before making a choice.