UAE residents maxing out credit card limits
We at cashy have long known that many of you are struggling with credit card debt, indeed many of you have shared your stories with us – supporting this is a new a new survey by compare4me.com which indicates the number of people making debt repayments using a credit card is on the increase in the UAE.
It’s easy to find yourself in credit card debt especially at holiday time and Ramadan, it seems no matter how well intentioned we are with all the presents, vacations and extra social time available the budget just gets blown. However, as we all know credit cards are not bad if managed responsibly.
UAE credit card rates are amongst the highest in the world, and in many cases more than double other countries, if not more. Yet despite these high rates 42% of those who answered the survey said that they only made the minimum payment on their credit card each month.
High credit card rates could have disastrous consequences for your finances. Here’s an example to illustrate: say you have AED 30,000 ($8,167) debt on a credit card with 26.4% interest rate (low for UAE standards). If you only pay the assumed 5% minimum payment, it will take you 16 years and 11 months to pay off your debt. And get this -- your total payment will be about AED 53,500 ($14,565) – almost double what you ‘borrowed.’
Of those surveyed more than a third have more than three credit cards, while half have nearly maxed out their credit limits. Many indicated they have fallen into the trap of transferring a balance from one card to another in a bid to save money, only then to fully utilise both credit cards leaving them with double the debt.
If your struggling with spending habits, or one of the 45% who said their monthly debt repayments were beyond their means, consider renaming your credit card a ‘debt card.’ It is remarkable how we are able to change our relationship with the piece of plastic when we think of it as a debt card. It just may stop us getting deeper and deeper into financial difficulties.
Have you used a credit card recently for making debt repayments?