Why Credit Cards aren’t as Rewarding as You’d Think?

Why Credit Cards aren’t as Rewarding as You’d Think?
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UAE saw a noticeable rise in credit card spending in 2018, which made us start thinking about the reasons behind this upwards trend. Were these spends caused due to boisterous modern credit card benefits? Or were they actually a symptom of a deeper, fundamental flaw in the numerous credit card benefits programs offered today? As UAE citizens become increasingly aware of the unmentioned costs behind these seemingly straightforward credit card benefits, card rewards may soon need to be restructured entirely. In fact, it seems like rewards may not even be a criterion for judging the best credit cards in Dubai in the near future.

And a recent report by the Wall Street Journal seems to suggest the same, citing drastic upcoming changes to rewards programs. So let us take a look at the real costs behind a credit card benefits program.

1. Direct Costs

Credit card issuers make profits mainly through interest charged on outstanding balance amounts. To cover the cost of offering diverse credit card benefits, rewards cards typically carry higher annual membership fees, charges and interest rates than regular credit cards. So as it turns out, the best credit cards in Dubai not only offer more rewards but also charge more.

2. Unused Benefits

Very often customers are lured in by new and attractive credit card benefits that do not fall under their typical spending habits. For example, the idea of a free round of golf may seem exciting at first, but unless the cardholder is an avid golfer it is an extra credit card benefit that will most likely be unused after the first few months.

3. Spending Requirements

One of the many reasons we advise against picking the best credit card in Dubai solely on the basis of the offered rewards is that these credit card benefits often come with strings attached. Most credit card benefits are made available only after meeting a ‘minimum monthly spend’, which is specifically designed to make the cardholder spend more and racking up greater interests.

4. Limited Benefits

Some of the best credit cards in Dubai use attractive language such as ‘unlimited credit card benefits’, to draw in customers. However, it is useful to note that these so-called unlimited rewards still fall under the restrictions imposed in their associated terms and conditions. Such restrictions are commonly seen in the form of maximum monthly caps.

5. Partnered Locations

Another severe limitation to credit card benefits is the availability of said offers at partnered locations only. It would be unfeasible for a credit card issuer to simply offer discounts at any retail store around the globe. Instead, the best credit cards in Dubai will choose to negotiate partnerships with popular brands and chosen vendors, offering discounts and vouchers at only these locations. New customers should ensure that their most frequented store locations fall under the eligibility criteria.

6. Redeeming Points

Most card issuers offer credit card benefits in the form of loyalty programs. The more the cardholder spends with their credit card, the more points they earn. Loyalty points can then be used for incredibly lucrative rewards such as flight tickets, hotel reservations, electronics and more. But when it comes to actually redeeming these points, cardholders find that the loyalty points cost is far greater than they expected. Loyalty point purchases are a great way of availing credit card benefits, but only if the cardholder is ready to wait long enough.

7. Welcome Offers

A common problem seen across even the best credit cards in Dubai is their short-lived practicality. Welcome offers may be thought of as the ‘honeymoon phase’ in a credit card relationship. Sign-up bonuses and new customer incentives offer the cardholder exorbitant amounts of loyalty points, statement credit and even direct cash back. Yet within a year or two of using the card, the credit card benefits spring runs dry. While one would expect to be consistently rewarded for their loyalty to the credit card, it is unfortunately not the case.

8. Over-leveraging

Whether it’s for the best credit card in Dubai or for an auto loan, applications made for any financial service will be run through strict eligibility checks. One of these checks is a credit history check. Credit bureaus in UAE maintain records of financial histories for all residents that are of banking age. As credit card benefits typically decrease after the first year, most cardholders will choose to pick up another rewards card and in the process, rack up more liabilities in their credit history. These liabilities may eventually start to over-leverage the cardholder, blocking them from availing crucial financial services such as home loans and more. While a single credit card may help improve the cardholder’s credit score, having multiple rewards cards can actually do more harm than good.

Over to you

While we do not wish to dissuade anyone from purchasing a rewards card, we would like to impress the importance of identifying credit card benefits that match your spending habits and to carefully analyze all associated terms and conditions before making a choice. We hope this article helps you better compare the best credit cards in Dubai.

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