Credit card debt can quickly spiral out of control when consumers remain unaware of the various charges that accumulate beyond their monthly purchases. Banks and financial institutions in the UAE often impose multiple fees that can significantly increase your outstanding balance, making it crucial for cardholders to understand exactly what they might encounter.
Cash Advance Charges and Interest Rates
- Cash advances using credit cards have one of the worst fees in the credit card debt in UAE Banks normally assess a fee of 3% to 5% of the amount that is withdrawn as a flat upfront fee with most banks having a minimum charge of AED 50 and AED 100 per transaction.
- Cash advance rates can be as much as 5 to 10 percentage points higher than regular purchase rates, so it is a costly borrowing method. ATM charges are an added extra, especially if you use a machine that is not in the network of your bank. International cash advances attract extra foreign exchange fee as well as increased processing fees.
Foreign Transaction and Currency Conversion Fee
- As a resident of the UAE, you may have encountered a foreign transaction fee that is charged by banks on foreign spending, especially when travelling or purchasing products online abroad. Banks usually make 2% to 4% of the transaction amount, but this is sometimes waived as a premium card feature.
- Dynamic currency conversion involves a particularly sneaky fee that a lot of travelers have to deal with. When traders overseas give you the option to charge your card in UAE dirhams rather than the local currency they usually use uncompetitive exchange rates and other conversion charges.
Credit Increases and Over-Limit Penalties
When you go over your credit limit, you attract over-limit charges that the UAE banks are strict on. When your balance exceeds your credit limit, which has been approved, banks usually charge AED 100 to AED 500, whether the excess balance is due to new purchases, interest charged, or fees. Other banks do not mind small over-limit balances on a temporary basis but they do assess a penalty.
Credit Card Debt becomes more manageable when you understand how banks handle credit limit increases. While banks may approve temporary limit increases for specific transactions, they often charge processing fees for these services. Permanent limit increases might seem beneficial, but they can encourage higher spending and increase potential debt accumulation.
Balance Transfer and Processing Charges
- Balance transfer promotions appear attractive with low introductory rates, but banks typically charge processing fees ranging from 1% to 3% of the transferred amount. Many promotional rates expire after six to twelve months, reverting to standard rates that might exceed your original card’s interest charges.
- Processing fees apply to various credit card services beyond balance transfers. Statement reprinting, duplicate card issuance, PIN regeneration, and payment processing through certain channels all carry specific charges. Banks often provide free alternatives for many services, but convenience options typically cost extra.
Protection Through Awareness and Action
Reading your credit card agreement thoroughly helps identify all potential fees before they impact your finances. Banks must disclose all charges in their terms and conditions, though the language can be complex and difficult to navigate.
Understanding Hidden Fees in Credit Card Debt empowers UAE consumers to make better financial decisions and avoid unnecessary charges that can dramatically increase their debt burden. Proactive management and awareness represent your best defense against these often-overlooked costs.
