Multiple credit card applications up as more UAE consumers seek cash relief

Number of credit card applicants up by more than 60%

Image Credit: Corbis
To ensure they get at least one application approved, UAE residents make at least three credit card requests at the same time.

Dubai:  More and more people in the UAE seem to be reaching out to banks for help with managing their household bills these days.

According to a personal finance comparison site, the number of consumers looking to secure plastic money has increased significantly.

During the first three months of the year, the number of people applying for a credit card through compareit4me.com went up by 65 per cent compared to a year earlier.

And it looks like households are having trouble getting their applications approved, and many have ended up having to file multiple applications at the same time just to get a bank approval.

Data provided by the site showed that in the first quarter of 2017, the average user applied for 3.25 cards each, compared to the average of 2.07 applications per user seen for the full year in 2016.

“This suggests that, as we saw with personal loans towards the end of 2016, those seeking credit in the UAE may be having to work harder to secure it,” said Jonathan Rawling, CFO of compareit4me.com.

“Such an increase in the number of applications per user tells us that, rather than simply applying for the credit card they want, UAE residents are being forced to shop around for the credit card that they can actually get an approval for,” he added.

According to the data provided by a bank, residents in the country still managed to secure cash assistance from the banks, but lending conditions remain tight.

Personal debts incurred by residents in the UAE reached Dh434.23 billion in the third quarter of 2016, barely rising from Dh430 billion in the second quarter. Personal loans for consumption amounted to Dh138.95 billion, while borrowings for business reasons hit Dh295.28 billion.

The reason for the slow growth in personal debt levels is that financial institutions are cautious about extending credit to customers. “Lending institutions have more strict guidelines because deposit growth is limited,” a source at one major bank had said.

Rawling said the liquidity crunch caused by the low oil price has affected the banks’ appetite for giving out credit. “Couple this with the widespread adoption of credit reports from Al Etihad Credit Bureau in the UAE, and you have an environment that sees only the most credit-worthy individuals approved for their first-choice financial products.”

While credit is hard to come by, residents in the UAE may soon have to deal with higher borrowing costs. The US Federal Reserve has recently increased its benchmark rate, a move that is likely to make interest rates for car loans, personal loans, credit card balances and mortgages more expensive over the longer term.

A few lenders had lowered last month the interest rates on personal loans in an effort to stimulate borrowing. One bank announced recently its “personal finance sale,” offering UAE residents a chance to borrow money at less than 3 per cent annual interest.

The attractive rates, however, are being offered at a very limited period and soon, the impact of the US Federal Reserve’s interest rate hike will be felt.

 

 

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