DUBAI: When was the last time you looked closely at your credit card bill or monthly account statement?
What misses the eye can spring some nasty surprises. For all you know you could be paying for things you might not even be aware of.
And because not many people ask questions, the litany of hidden charges continues to grow as banks here master the art of nickel-and-diming customers.
Nothing is free. Not even the ‘free-for-life' credit card which comes preloaded with maintenance fees at certain banks.
Whether it's a loan top-up, request for a new cheque book or cancellation/replacement of a credit card, there's an annoying hidden fee for almost every service worth its salt.
Banks will now charge you for even something as simple as writing a ‘no dues' letter at the end of your loan term.
Not surprisingly, a fifth of banking customers in the country are considering ending their relationship with their main bank, according to a study by personal finance website cashy and YouGov Siraj.
Hidden charges and exorbitant fees top the list of grievances. Earlier, an Ernst and Young survey found that 40 per cent of bank customers across the GCC are unhappy with their banks. Again, their main grouse centred around hidden charges.
"I am familiar with late payment and loan processing fees, but I can't make sense of some of these new charges. For instance, what on earth is this ‘validation fee' reflected on my statement? I contacted the bank customer service but the telesales guy gave me some technical mumbo-jumbo which left me even more confused," said disgruntled customer Altaf Rana.
Another frustrated customer, Roberto Kauffman, said he was appalled when his bank docked Dh100 from his account because it was ‘inactive'.
Regulations flouted
In February this year, UAE Central Bank Governor Sultan Nasser Al Suwaidi admitted that "matters [related to exorbitant service fees charged by banks] are getting out of control". Shortly thereafter, the country's apex court issued a circular which puts a cap on the fees bank can charge. Processing fees have been limited to one per cent of the loan amount, with a minimum of Dh500 and a maximum of Dh2,500. The Central Bank has also been clear on hidden charges, saying that "banks and finance companies may not impose any commissions, fees, charges or fines other than those mentioned in the said table without Central Bank's written approval".
Yet banks continue to flout the regulations by finding ingenious ways to fatten their bottom line.
Ask Satish Asthana who noticed a Dh15 monthly charge on his bank statement towards a ‘cash cover charge'. "I had been paying it for months. Nobody from the bank ever told me anything about it," he said.
Ludmila Yamalova, managing partner at Dubai-based law firm HPL Yamalova and Plewka JLT, says her bank charges them every time it transfers salaries from the firm's corporate account to the individual accounts of their staff.
Banks deny any malpractices saying such charges are mentioned in the agreement which a customer signs with them. "If they failed to read the fine print, then well it's their mistake," said the manager at a bank.
Sundar Parthasarathy, Executive Vice President, Consumer Assets, Abu Dhabi Commercial Bank (ADCB), said following Central Bank regulations it's mandatory for banks to publish fees and charges applicable on credit cards, personal loans and accounts.
Banks do carry service fees guides on their websites. It's not easy to spot them though, as they are deliberately hidden in most cases. Another common gripe relates to obscure interest rates and the way they are calculated.
Financial expert Craig Plumb, Head of Research, MENA, Jones Lang LaSalle, admitted that banks don't stick to their contracts when it comes to mortgages.
"Apart from hidden charges, there is the issue of banks not following a particular pattern of interest rate calculation. There are a lot of complaints about the banks changing interest rates and swapping them to something else," said Plumb.
Ask your bank
1. If you're promised a ‘free' credit card, ask if it's ‘free for life' or free for the first year only and if there is any maintenance fee to go with it. Follow the same routine for supplementary cards.
2. Don't fall for a low interest rate loan. Ask if it's a flat rate, reducing balance rate or annual percentage rate. Remember, reducing balance and annual percentage rates are higher than flat rates.
3. Ask your bank if they follow the Emirates Interbank Offered Rate (Eibor) or if they have their own base prime rates. Eibor is the reference rate most commonly used by borrowers and lenders to conduct financial transactions in the UAE.
4. Check with your bank as to how the base prime rates are calculated.
5. Ask the bank clearly if your charges like interest rate figures and processing fees, are monthly or annually. These are not always clearly mentioned by banks even on their websites.
what you pay when you take a mortgage or personal/auto loan from a uae bank
- Processing fee: ranging from Dh500-Dh2,500
Early settlement fee: 1% to 1.5% of remaining balance. The charges can go up to 3%-5 % if the borrower uses funds from another bank to pay off the mortgage ahead of its term
- Loan top-up fee: 1% of loan amount
- Late payment fee: Dh100-Dh200
Fee for ‘no dues' letter: Dh100-Dh200. Some banks charge Dh500 for no liability letters issued to other financial institutions
- Re-scheduling fee: Dh250
- Car loan clearance fee: Dh50
- Loan cancellation fee: Dh150-Dh250
- Property valuation fee: Dh3,000-Dh5,000
- Fee for insufficient funds for standing order: Dh25
- Cheque return: Dh100 Credit life insurance: Dh0.75%-0.80% of loan amount NoC to police for change of car registration: Dh200
What you pay banks when you take a credit card
- Annual fee for primary holder: Dh100 onwards depending on the card type. Some cards are free
- Late payment fee: Dh150-Dh180
- Maintenance fee: Certain category of cards come preloaded with this
- Card replacement fee: Dh100; at some banks there's no fee
- Over-limit fee: Dh150-Dh180
- Copy of statement: Dh25
Other charges
- Monthly fee if the balance falls below minimum required: Dh50-Dh100
- New cheque book: Dh25 onwards
- Statement by fax: Dh25 Account closure: Dh100
What banks tell you
1. Your eligibility status for a loan or credit card
2. Flat interest rates
3. Any promotional or ‘free' offers
4. Whether your company is listed with the bank or not.
What banks don't tell you
1. The difference between flat rate, reducing balance rate or annual percentage rate (APR)
2. Method of calculation of interest rates which varies from bank to bank
3. Charges on your loans and credit cards other than normal interest rates. They are mentioned on the websites for credit cards mostly; however for loans, not all charges are clearly displayed.
