How Do Credit Cards Work? A Beginner's Guide to Credit Cards in UAE

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You might have heard your friends and family rave about the rewards they earned with their credit card in UAE. You might know by now that swiping your credit card can earn you rewards like cashbacks, air miles, etc.

However, you might also know that credit cards can result in crippling debt, if not used carefully.

So, the question is how do you get the best out of your credit card without getting in debt? How do credit cards work? What is the best credit card in UAE?

How Do Credit Cards Work in UAE?

A Credit card can be seen as a short-term loan. A Credit card differs from Debit cards.

We all know that Debit cards use money from your Checking account. However, that is not the case with Credit Cards.

Credit cards are a loan that you have to pay back every month. With every swipe, you are indebted to the bank, which you have to pay back within every billing cycle.

Every activity on your credit card is reported to the credit bureau, unlike your Debit Card. It will help you build a credit report- good or bad (depending on your repayment). A Credit report will help you get a better and higher amount of loan in the future.

 Now, let’s discuss some terms that will help you understand the workings of a Credit Card in UAE better.

Chris standing up holding his daughter Elva

Credit Cards Terminology in UAE

  • Credit Limit: The credit limit of your credit card is decided by the issuer of your credit card in UAE. The limit of the credit card will depend on your monthly income and credit. Better credit and higher salaries mean higher credit limits.
  • APR: APR is the Annual Percentage Rate. This is the interest rate charged when you don’t pay your bill in full on every billing cycle.
  • Minimum Payment: A minimum payment is an amount you have to pay if you are not able to pay the bill in full every month. It is a very amount in comparison to your balance amount.
  • If you don’t pay the bill or the minimum amount within the billing cycle, you will be fined. It is recommended to always pay your entire bill, if possible. As it is, a small mistake on your part can last for years in the credit report.
  • Billing Cycle: The cycle during which the swiping of your credit card in UAE is taken into consideration. It refreshes every month.
  • Due Date of the Statement: The date by which you must pay the bill of your credit card in UAE.
  • Balance: The remaining debt on your credit card is known as the balance.
  • Available Credit: The credit remaining on your credit limit within a billing cycle is the Available Credit. Suppose, your credit limit is AED 1000 and you have used AED 500, the remaining AED 500 will be the Available Credit.

What are the interest charges/Rates on Credit Cards in UAE?

Most people shy away from getting a credit card in UAE due to the interest rate. However, the fact is that you don’t have to pay even a Dirham if you pay your bill in full.

Interest rates are generally charged for late bill payers and the remaining balance.

Credit Card Interest-Free Periods

Other fees of the Credit Card in UAE

With that, there are other fees of the credit card in UAE, that you should know of.

Foreign Transaction Fee:

  • Balance Transfer Fee: When you transfer your balance from one credit card to another, you are usually charged a fee for the transfer.
  • Cash Advance Fees: This is the fee you pay for every cash you borrow from your credit card. We recommend avoiding borrowing cash as the credit card issuer charges a hefty sum for every time you borrow cash.
  • Late Fee: If you don’t pay the minimum amount by the due date of the statement, you will be charged a late fee.
  • Annual Fee: The issuer of the Credit Card in UAE charges an annual amount for the services provided with the Credit Card.
    However, some of the best Credit Card in UAE comes with no annual fee. Try looking for one with no annual fee, if you are eligible.

Most Common Types of UAE Credit Cards

Different Credit Card issuer provides different types of Credit Cards. Here is a list of the most common type of Credit Card in UAE.

  • Charge Credit Cards: The only difference between regular cards and Charged Cards is that Charged cards don’t have a limit. However, there is a limit on how much can be charged at once to the card.
  • Also, the bill should be paid in full with every card statement.
  • Secured Credit Cards: Security Credit Cards required security deposits for approval. The upfront payment you make will serve as the limit of your credit card i.e, Credit Limit.
  • Rewards Credit Cards: These credit cards are the ones that offer rewards for every swipe of the credit card. These rewards can include anything from cashbacks to air miles to statement credits.
    However, terms and conditions apply to this type of credit card in UAE.

How to apply for a Credit Card in UAE?

You can visit the nearest branch of the credit card issuer to apply for a credit card. You can also apply online. Make sure that when you apply for a Credit Card in UAE, you have all the required documents with you.

Based on your eligibility, the credit card issuer will decide whether to provide you with a credit card or not.

Benefits of a Credit Card In UAE?

The benefits of having a credit card in UAE are:

  • Building your Credit
  • Earn rewards
  • Discounts on shopping, etc.
  • Helps with taking out a loan

Some of the best Credit Cards in UAE are:

Here is a list of the best credit cards in UAE to help you out with your search.

  • Najm Platinum Cashback Card: This credit card is free for life. It has a variable rate of interest- between 3.25% to 3.99%.
  • Emirates NBD Skywards Infinite Credit Card: With the variable rate of interest between 3.09% to 3.25%, the Skywards Infinite Card has an annual fee of AED 1500.
  • Standard Chartered Platinum Credit Card: The SC Platinum credit card is free for the first year. However, AED 525 will be charged annually from the second year. It has an interest rate of 3.45%.
  • Emirates NBD Titanium Credit Card: The Emirates NBD Titanium credit card has an annual fee of AED 400. The interest rate on this card is 3.25%.
  • Mashreq Smart Saver Credit Card: The Mashreq Smart Saver Credit Card is free for life.
  • RAKBANK Titanium Credit Card: The RAKBANK Titanium Credit Card is also free for life.
  • Dubai First Platinum Life Card: The Dubai First Platinum Life Card is free for the first year. From the following year, you will be charged AED 550. The interest rate on this credit card is 3.19%.
  • HSBC Platinum Select Credit Card: The HSBC Platinum Select Credit Card has no annual fee.
  • FAB Platinum Credit Card: The FAB Platinum Credit Card with Mastercard is free for life. The rate of interest on this card is 3.25%.
  • Union National Bank Titanium Credit Card: The primary Union National Bank Titanium Credit Card is free for life. However, the supplementary credit cards have an annual fee of AED 105. The interest rate of this credit card starts at 3.19%.

Chris standing up holding his daughter Elva

Credit Card Billing Cycle in UAE

Over to You

Before you go ahead and apply for a Credit Card in UAE, consider these factors: Can you use the credit card responsibly? Will you be able to control your urges? Are you an impulsive buyer?

If you have doubts about any of these factors, it would be better for you to not get a Credit Card in UAE.

Remember, getting in Credit Card debt is easy. Getting out of debt is the problem. It can be a hassle and a headache.

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