As an expatriate in the UAE, your biggest concern is your savings. Your relationship with banks starts almost immediately after you land in this country and the first step is to decide between opening a current and a savings account.
What is the difference between a Current Account and Savings Account?
A current account is a "general-use" account that lets you make transactions on a daily basis. When you open a current account, you are given a cheque book, and a debit card that lets you withdraw cash from any ATM in the country. Current accounts typically have a low rate of interest.
A savings account is an interest-bearing account that can be used for depositing extra money that you don't need to pay short-term bills. It typically has a higher rate of interest. A savings account can also be opened in a foreign currency (most common being the GB pound and the US dollar). It can also come with a passbook (or cheque book/credit card) to record any monthly transactions.
Most banks in the UAE allow residents to open a savings account. However, every bank will have its own eligibility criteria, so you will need to check these with the bank you are dealing with. The minimum age requirement to open a current account in the UAE is 18 years, but savings accounts can be opened for minors, but in this case the presence of guardians is required for all banking transactions.
Read the fine print
Keren Bobker, a senior partner with Holborn Assets, says when you open an account, “ask for full details about the account and read them. It never ceases to surprise me how many people sign forms for accounts and plans without checking what they are committing to.
It never ceases to surprise me how many people sign forms for accounts and plans without checking what they are committing to
“People need to check whether there is instant access or if the cash is tied up for a certain number of days. Is the interest rate fixed for a set period or variable? Is there a requirement to pay in further money?”
Some banks may have a requirement for a minimum balance in their savings account. The failure to have that amount can incur fees or a reduced interest rate. So check the terms, read the fine print and see if there is a minimum balance requirement or any limits on moving money in or out of your savings account, whether through the branch, an ATM or by electronic transfer. Sit with the banking officer and ask for all the details.
Features and charges
Here are some basic features of savings accounts in the UAE.
Debit card annual charges: Some banks offer free-for-life debit cards, while some offer them free for the first year only.
You can enjoy unlimited usage of ATMs (including partner ATMs): While some banks offer unlimited ATM transactions, others may charge for withdrawals. Even though the charges are minimal, they can add up to a big amount over numerous withdrawals.
Currencies: Some banks offer savings accounts in the major foreign currencies. If that is your need, then you must choose one appropriately.
Charges for non-maintenance of minimum balance: Savings accounts usually carry a minimum balance requirement. If you cannot maintain that, then there may be charges levied to your account. These can be different with each bank, so check the minimum balance required.
Withdrawal limits: Sometimes banks can cap the daily withdrawal limit, either by an amount or by the number of transactions.
Cheque books: Issuance of cheque books is prohibited for savings accounts, but counter-cheques and ATM cards , as applicable, maybe made available to account holders.
Documents needed for opening a savings account
- Original passport for verification along with a copy
- Copy of residence visa
- Salary certificate and a reference letter (for salaried individuals)
- Original Emirates identification card (for all customers)
- Proof of UAE residence – you can bring your DEWA bill/ rental/ lease agreement/ title deed/ employment letter
- Original labour card
- If you are on your husband’s or father’s visa, you can get your work permit.
- For all self-employed customers, bring in your trade licence.
- For income transfer customers, original income transfer letter from the employer must be provided.
Understand how banks are regulated in the UAE
All banks that operate in the UAE are regulated by the Central Bank of the UAE, says Bobker.
“Banks are assessed regularly and must provide information regarding balances and liabilities. This checks what is known as capital adequacy.” Banks also undergo stress testing.
The capital adequacy ratio (CAR) is an important factor that measures the amount of capital a bank retains compared to its risk. This will reflect the financial soundness of a bank. Stress testing verifies the stability and reliability of the system, and the robustness of the organisation under extreme conditions.
Learn about security and risks associated with banking
Each bank has an ecosystem of products, services, partners, branches, websites, apps and attitudes that you need to consider. Financial coach Steve Cronin, founder of DeadSimpleSaving, says it’s important to understand the security level and risks associated with each bank.
Generally, the bigger the bank, the more secure it is going to be, Cronin says. “However, with all bank accounts, there is a risk of the account being hacked and your money being stolen. Also, some banks prevent you from accessing your money if they are close to collapse,’ he says.
Remember, banks lend your deposits out to companies and other individuals, aiming to make significantly more money from lending than they pay out on deposits. If too many people try to withdraw their deposits at once, the bank could collapse and you might lose your money.
Complaints, fines or warnings by the regulator, branch closures, and firing of staff, large fee increases or the sudden disappearance of incentives are red flags that your bank may be struggling
“Moreover, banks are forced to hold reserves, have adequate capital on their balance sheet and stay within loan-to-deposit ratios to reduce this risk,” he adds. So check the news before depositing your money is his advice.
“Complaints, fines or warnings by the regulator, branch closures, and firing of staff, large fee increases or the sudden disappearance of incentives are red flags that your bank may be struggling.
“Be careful with banks that are about to merge or have just merged – there may be teething problems as systems are changed and staff are moved. Having said that, bank mergers in the UAE have been smooth so far, so there is no need to pull your money out if your bank is merging,” says Cronin.
Have more than one account
Cronin says have at least two banking relationships in the UAE, as well as another bank account overseas (either offshore or in your home country). “This is in case you have a disagreement with your bank, they freeze your account, or they refuse to provide a specific service. For example, some banks can refuse to send money to the account of an exchange house (such as Al Ansari or UAE Exchange) or dirhams to a dirham account overseas (some banks overseas can provide dirham accounts).
“Be careful about joint accounts here as they can get frozen if something happens to your partner, leaving you without access to funds. You and your partner should both have separate accounts.”
Build an emergency fund in another account
Building up an emergency cash fund is a sound move in case your savings account gets frozen. “In case something goes wrong, such as redundancy, family issues or illness, this is useful,” Bobker explains. “One must have a minimum of three months’ outgoings, and more if you have children. As bank accounts can be frozen on change of job if you have debts, it is sensible to keep this in a different bank so it remains accessible in case it is required.”
Maintain a good relationship with the bank
The relationship you have with your bank is of prime importance. Having a good relationship with the bank ensures that you will receive a higher level of trust and priority and a lot of benefits, including obtaining any necessary funding, preferential interest rates, and better terms. If you are working in the UAE, find out if “your employer has a good relationship with this bank. It might get you a better interest rate on loans, etc. You're going to be putting the money you earn into this bank account. Banks care a lot about receiving your salary, as it gives them security if they ever lend you money through a card or loan.” says Cronin.
Inquire about bank interest rates
There are several factors that affect interest rates. Cronin says, “Some accounts only offer a high rate of interest for small amounts. But you may lose your high interest rate if you pull money out before a specific time frame.
“For some fixed deposits, you may not even be able to take your money out at all – be careful with such an account as it will not be a useful cash buffer if you unexpectedly have cash flow problems. I think the first thing to ask your bank is what's the best interest rate available without locking up your money for years? How long is the rate of interest going to last? If you get an account that has a high interest rate, check when that rate expires and other limitations such as the maximum amount you can get that rate on,” explains Cronin.
Variable vs fixed
Your bank can offer you either a fixed rate of interest or a variable rate of interest. Fixed rate savings accounts are usually more predictable than variable rate accounts as the rate of interest does not change and you know what you are signing up for.
When your savings account has a variable rate of interest, it means that the interest rate you sign up for is not guaranteed to last. The bank can reduce the interest rate – or increase it. The bank will usually tell you in advance when it’s going to reduce the rate. But you need to check the interest rate from time to time and be prepared to move your money if you see a better rate elsewhere.
When opening a savings account in the UAE, one must remember that the UAE dirham is pegged to the US dollar. So, the good news for the UAE savers is that whenever the US Federal Reserve raises interest rates, the countries with currencies pegged to the dollar, like the UAE, will follow suit. Similarly, when the Federal Reserve drops its rates, it will affect savers here. As of 19th February 2019, rates rested at 2.25 per cent from the UAE Central Bank and other Arabian Gulf regulators.
Bobker says, “It is important to check whether the interest rate is fixed for a set period and if so, to ask what happens afterwards. Will it default to a variable rate?”
Also, when a bank is offering a high rate of interest, find out the reasons why it’s doing so. “Is it trying to grow its market share or is it desperately trying to shore up its balance sheet?” warns Cronin.
Get higher interest rates
When you put money in a savings account, the bank is technically borrowing the money and paying you interest in return. The interest rate determines how much money a bank pays you to keep your funds on deposit. To explain it simply, the bank takes the money you deposit and uses it to earn more money. It can invest the funds by lending to other customers or investing it in other ways.
To achieve the highest savings rates, you will often need to lock your money away for a year or more
Longer-term savings sometimes translate into higher interest rates. Jon Richards, CEO of YallaCompare, says, “You will only get the best out of a savings product if it suits you and your income. To achieve the highest savings rates, you will often need to lock your money away for a year or more. That doesn't work for everyone. When looking for a suitable savings account, I'd advise consumers to consider the minimum term, fees and penalty for withdrawals, minimum balance, currencies and rates.”
The best way to ensure that you get the best interest rates is to shop around a bit and check rates offered by different banks.
Go the e-savings route
E-saver accounts usually offer better interest rates, sometimes in exchange for not providing a debit card or cheque book, says Cronin. These days, banks are shifting more and more online, so the difference may just be in the name, he says.
Bobker agrees that online only accounts can offer a slightly higher rate of interest, but shopping around is important. “Recently, the highest rates of interest for dirham accounts are being offered by FAB at up to 3 per cent, but conditions apply.”
If I am opening an account with an Islamic bank, what should I keep in mind?
Islamic banks do not pay interest as it is forbidden under Sharia law, says Cronin. Sharia-compliant savings accounts pay you an "expected profit rate" instead. This is an outcome of the profit the bank earns from lending out money and other services, such as Islamic mortgages. “When you keep your money with an Islamic bank, you are offered a profit rate that may be influenced by both the interest rate from the UAE Central Bank and the recent performance of the bank.”
Cronin says you typically get three types of Islamic bank account.
With some accounts, you receive nothing from the bank at all. Others make no regular payments but enter you into a prize draw for a chance to win cash prizes or cars, etc. These can add up to a reasonable rate every month. For example, the ADIB Ghina savings account gives customers the opportunity to win Dh3 million three times a year, and 10 winners every month receive Dh10,000 each.
There are other accounts that pay a “profit rate” rather than an interest rate. This is in theory based on a share of the profit the bank makes from providing products and services, and so can vary from month to month, but in practice, many Islamic banks offer a fixed profit rate on deposits. You will get a higher profit rate for savings accounts and longer-term deposits, much like for a non-Islamic bank.
Best savings account interest rates
1. Standard Chartered
Xtra-saver account
Up to 2 per cent
Minimum balance to maintain: Dh3,000 or equivalent in USD
Annual fee: Nil
Account opening: Nil
2. Rakbank
RAKBOOSTER savings account
Up to 2 per cent
Minimum balance to maintain: Dh3,000
Annual fee: Nil
Account opening: Nil
3. Mashreq
MaxSaver account
Up to 1.5 per cent
Minimum balance to maintain: Nil
Annual fee: Nil
Account opening: Nil
4. LIVGOAL – Up to 2 per cent
This is the lifestyle digital bank by Emirates NBD
Minimum balance to maintain: Dh2,500
Annual fee: Nil
Account opening: Nil
5. Abu Dhabi Commercial Bank
Active-saver account
Up to 2 per cent
Minimum balance to maintain: Dh20,000
Annual fee: Nil
Account opening: Nil
6. HSBC
e-saver account
Up to 1.5 per cent
Minimum balance to maintain: Nil
Annual fee: Nil
Account opening: Nil
7. Emirates NBD
Smart Saver Account
Up to 2 per cent
Minimum balance to maintain: Dh3,000
Annual fee: Nil
Account opening: Nil
8. Emirates Islamic
E-savings account
*** up to 2 per cent p.a. expected profit rate
Minimum balance to maintain: Dh3,000
Annual fee: Nil
Account opening: Nil
9. Dubai Islamic Bank
e-savings account
*.39 per cent p.a. expected profit rate (as of last quarter)
Minimum balance to maintain: Dh1,000
Annual fee: Nil
Account opening: Nil
10. Abu Dhabi Islamic Bank
Smart-account
** 0.5564 per cent p.a. expected profit rate (as of Jan 2020)
Minimum balance to maintain: Nil
Annual fee: Nil
Account opening fee: Nil
