InFocus | Credit Privilege Cards
The danger of debt
A few preventive measures can help you from defaulting on credit card payments.
- By Shikha Mishra, Staff Writer
- Published: 00:00 June 10, 2006
- Side step the late fee: Make your credit card payments before the due date. Late fees can add up
- Don't pay only the minimum: Make sure you pay your entire bill each month. If you can't pay it all, pay as much as you can. You will end up paying less interest and your purchases will be paid off much sooner
- Find a low rate card: Introductory cards may charge you as little as two per cent interest. Keep track of when the low rate period ends and then switch to another low rate card
- Be realistic: If you can't afford to buy something, don't buy it. While credit cards can be very useful, it's not free money.
Courtesy: National Bank of Abu Dhabi
A few preventive measures can help you from defaulting on credit card payments
Financial health is akin to physical health - a few preventive steps today will ensure that your finances get a clean bill of health tomorrow.
The first step towards avoiding the debt trap is using a credit card wisely. In the absence of a credit bureau, most banks in the UAE prefer arresting the problem of credit card defaults by limiting the amount of credit that is available to a customer.
According to Louis Scotto, Emirates Bank General Manager, Retail Banking, customers are given a credit limit after the bank determines the number of cards a customer holds at the time of application.
"I always recommend that customers establish a standing monthly order for card repayments," says Scotto.
RAKBank tries to ensure that its customers borrow only for a specific purpose and in amounts they can afford to repay.
"In order to prevent the customer from getting into a debt trap, we make sure that the customer has sufficient net disposable income at his behest after fulfiling all his monthly financial obligations to the bank.
"This limit is set after taking into consideration various demographic, income and debt-related factors of individual customers; all operating under a broader guideline," says Anil Chander, Head of Credit Cards Division at RAKBank.
HSBC ensures that a customer doesn't go overboard by setting a credit card limit according to the customer's income.
"We try and limit a customer's credit by looking at their total borrowings. But this is not always easy to implement since customers have loans that they do not disclose to the bank," says Priyan Attygalle, Senior Cards Manager, HSBC Bank Middle East Limited.
If everything else fails, there is a foolproof way of avoiding credit card debt - stop it before it starts.
"Always spend wisely and keep within your financial means. Plan to spend in line with your income and other financial commitments to ensure that any outstanding amount can be repaid over a few months and not years," advises Sadek Karam, Senior Assistant General Manager - Head of Retail Banking Group, National Bank of Umm Al Quwain.
Credit card debt
Stop before it starts
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