Dubai: Credit cards may have made everyday spending so much easier for most people, but they can also be a source of serious financial problems. That’s why cardholders can never be too careful when using these little pieces of plastic money.

However, the majority of consumers in the UAE are not even aware of the interest rates they have signed up for.

According to a survey conducted by compareit4me.com, a finance comparison site,  63 per cent of credit cardholders in the country are “in the dark” about the interest rates their banks are charging.

Financial experts said this is alarming, considering that interest rates can cost more than just an arm and a leg, and not knowing how much they’re paying for missing monthly payments could easily lead people into debt disaster.

“I urge credit card users to swipe [their plastic] responsibly – the alternative is excessive monthly payments that can quickly become unmanageable,” said Jon Richards, CEO of compareit4me Group.

Banks in the UAE charge credit cardholders about 2.25 to 3.09 per cent, but a financial planner warned that since this is collected monthly, the actual amount people pay in a year can go up to about 27 per cent to 30 per cent. That’s about Dh27,000 for every Dh100,000 unpaid credit card dues, according to Andrew Prince, financial planner at deVere Acuma.

“Using very simple arithmetic, multiply 2.25 per cent by 12 months and you get an annual figure of 27 per cent. Significantly, this ignores the effect of compound interest where in reality the interest rate you are really being charged is over 30 per cent,” Prince explained.

Richards said that credit cards are a big business in the UAE, with about 5.9 million debit and credit cards in circulation and spending on plastic rising year-on-year.

“However, like any form of debt, credit cards need to be managed responsibly. To discover that nearly two thirds of credit cardholders do not know the interest rate attached to them is alarming.”

The survey also found that 28 per cent of credit cardholders do not know how missing a payment would impact their chances of getting a loan in the future.

“With the launch of Al Etihad Credit Bureau, every aspect of your financial history is tracked and can be analysed by banks,” said Richards.

“Missing monthly payments or bouncing cheques are some of the things logged on your credit report and can affect your future ability to access finance such as a loan, another credit card or even a mortgage.”