InFocus | Credit Privilege Cards
Living a cashless life
With banks reporting an increase in customer base, the UAE credit card market is witnessing substantial growth.
- By Shikha Mishra, Staff Writer
- Published: 00:00 June 10, 2006
- Ensure the signature panel on the back of the card is signed
- Protect cards as if they were cash. Do not leave them unattended anywhere
- Change your PIN number frequently. Never disclose it, not even as a verification code to the bank
- Monthly statements should be checked for discrepancies and reported immediately
- Be aware of all fees and charges
- Ensure that payments are made in time to avoid late payment charges and high interest rates
With banks reporting an increase in customer base, the UAE credit card market is witnessing substantial growth
According to the Encyclopedia Britannica, the use of credit cards originated in the United States in the 1920s when oil companies and hotel chains began issuing them to customers.
Diners Club introduced the first universal credit card in 1950, followed by American Express in 1958.
Currently, the credit card market in the UAE is said to comprise approximately 1.6 million cards, and is growing at a rate of 10 to 15 per cent per annum.
"On an average, each cardholder has between two and three cards from different banks. There is intense competition in the market, which has a favourable impact for the customer in the form of competitive offerings and product innovations.
"For the major card issuing banks in the UAE, the credit card business is a major plank in their retail strategy due to the higher income margins that this product offers in comparison with the other standard retail products, especially in a rising interest rate scenario," says Anil Chander, Head of the Credit Cards Division at RAKBank.
The UAE credit card market is witnessing substantial growth with many banks reporting a double-digit increase in their customer base.
Sadek Karam, Senior Assistant General Manager - Retail Banking Group, National Bank of Umm Al Quwain, says that his bank increased its card base by more than 50 per cent in 2005.
"This growth resulted from increased customer awareness and the benefits associated with card usage," he says.
The fierce competition between local and foreign banks is leading to better choice for customers and a more mature market.
"According to official sources in the UAE, the credit card market grew 30 per cent last year. The growth rate of credit cards between 2001 and 2005 hit 15 per cent.
"These figures point to the fact that consumers are becoming increasingly aware of the importance of using credit cards instead of cash," says Khalid Bin Deemas Al Suwaidi, Head of Retail Banking, National Bank of Abu Dhabi.
Denzil Lawson, Senior Vice President and General Manager, Middle East and Levant, MasterCard International, feels that there is huge potential for the growth of the payments industry in the region.
"Card usage is growing rapidly across the region. The UAE is more mature than some other Middle Eastern markets in terms of card penetration, acceptance and state-of-the-art infrastructure; however there is room for further development in the UAE, and across the region, and MasterCard is playing a vital role in this," he says.
Even though the growth rate of credit cards is rising, it remains a predominantly cash-based society.
"By nature, this presents a major opportunity for significant growth within the cards industry as consumers become aware of the convenience of cashless transactions," says Louis Scotto, Emirates Bank General Manager, Retail Banking.
To popularise their use, most banks offer a host of benefits like air miles, restaurant discounts and a percentage of cash back on the money spent on the credit card to lure customers.
"Emirates Bank gives incentives like meMiles, zero percent interest on balance transfers for the first three months and free gold coins when applying for a Gold card," says Scotto.
Emirates bank recently launched the 'Options' Installment card, which enables customers to split repayments into 12 or 24 months.
HSBC gives its customers air miles rewards and a loyalty programme in the Middle East for shopping done anywhere in the world.
RAKBank, National Bank of Abu Dhabi and National Bank of Umm Al Quwain offer 'free for life' cards and a number of free features for their customers.
"We give free roadside assistance, purchase protection, travel accident insurance, three free supplementary cards and a one per cent interest rate if you transfer your existing credit card balance to a National Bank of Abu Dhabi credit card," says Suwaidi.
"National Bank of Umm Al Quwain offers a one per cent cash back and free features like credit up to 55 days, global discount card, travel insurance, purchase protection, Road ResQ and Medicom card apart from supplementary cards for family members," says Karam.
Banks are also targeting frequent flyers with credit cards that fulfil all their travel needs. Dubai Bank's credit card gives Dh1 million worth of free travel insurance, free travel inconvenience insurance, a travel assist service and a dedicated tele-ticketing facility that offers five per cent cash back on all travel bookings.
"Emergency services such as personal liability insurance up to Dh500,000, hospitalisation and assistance are also offered, making travel with Dubai Bank a completely risk-free experience," says Ricky Madan, Head of Retail Banking, Dubai Bank.
Another product that offers travel benefits is the recently launched National Bank of Dubai-Dnata co-branded credit card that gives one point for every dirham spent.
These points can be redeemed at selected Dnata outlets for travel-related products and services including purchase of tickets from more than 130 airlines.
"Standard Chartered Bank's Gold Travel credit card provides discounts on air ticket purchases from Dnata and free travel services including access to Dubai and Abu Dhabi airport VIP lounges, Marhaba and limousine service," says Anupam Shrivastava, General Manager, Credit Card and Personal Loans, Standard Chartered Bank.
The UAE market also offers Sharia-compliant credit cards and those that are aimed at specific segments: ABN Amro's Al Ameera card for women and credit cards by Standard Chartered Bank such as the newly-launched Manhattan credit card for the young and upwardly mobile, the MasterCard Golf Gold, MasterCard Cricket, the MasterCard Soccer and the Visa Marathon for sports enthusiasts fall into this category.
"Emirates Bank has the 'Al Shaheen Club' for high net-worth individuals, a product specifically meant for women and the meUniversity card for students," says Scotto.
Emirates Islamic Bank's credit cards operate in line with Sharia principles as they charge an annual fee in lieu of interest.
Need-specific cards
HSBC's response to the growing demand for need-specific credit cards are the Amanah Islamic card, a Sharia compliant card and the InSite card designed for Internet usage.
"The HSBC Amanah charge cards offer customers a grace period of up to 50 days for repayment and up to 60 per cent cash advance on credit limits," says Priyan Attygalle, Senior Cards Manager, HSBC Bank Middle East Limited.
No matter which bank you go to for your credit card needs, remember to factor in a bank's reputation, customer service and the benefits offered.
"A card that offers loyalty reward points for usage, travel and insurance benefits and convenience of payment locations are some of the features that card holders should look for," says Attygalle.
Chander of RAKBank urges customers to pay close attention to interest rates. "The quality of service provided and product benefits are also important," he says.
Customers should also check annual fees and decide whether they are on par with the benefits offered. "A customer must use the free credit period as this can result in substantial savings in interest expenses," says Karam.
Before stuffing your wallet with plastic, think about what you really need. Steve Bucci, President of the Money Management International Financial Education Foundation says, "A good rule of thumb is to have three cards ? Visa, MasterCard and American Express ? because most merchants will take almost all or at least one of them."
TIPS
Use your credit card wisely
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