Handle your credit card with care

In this day and age you don't have to carry a thick wad of bills whenever you want to shop.

All you need is that thin plastic thing that you can easily slip into your wallet: the credit card. Despite the popularity of plastic money, however, there are some issues that beg to be addressed.

Just when he had maxed out his credit card limit of Dh15,000, a Dubai-based expat, whom I shall refer to here as Ted, got a call from the bank telling him that his debt limit had been raised to Dh20,000.

After that, the bank kept raising Ted's credit limit until it reached Dh30,000. Ted was confused, though. His salary had not gone up - not even a small bit.

The bank called up once more, urging him to upgrade his card, which was apparently supposed to afford him better purchasing power and credit benefits. Despite repeated pleas not to grant him the card, a courier stood on his doorstep the next day and handed him his new card. No questions asked. No paperwork.

"For someone like me who comes from a country where one has to jump through hoops to get a simple credit card, it feels strange to see credit cards and offers being thrown at you and no one cares how much you earn," Ted says.

Ted has every reason to be concerned. The thing is, there is no free lunch. Credit card firms automatically raise debt limits for one obvious reason. They know that if they increase the credit limit, the customer will be enticed to spend more. The more the customer spends, the more the company earns. Failure to keep tabs on purchases, though, may just prove to be disastrous to the customer.

And while it seems very easy to get the plastic money, Ted is worried that not much has been done to protect cardholders against fraud. When he eats at a restaurant or buys something at the grocery, for instance, the cashier doesn't check the signature against the one on the card or ask for any identification.

Security

Back in his home country, Ted says a cardholder is asked to key in the PIN after each transaction. That way, the cashier is certain that the customer has paid with his own card. Without that kind of security system, losing a credit card could be catastrophic. A lot of things can happen from the time the card is lost until the owner realises it has been missing and alerts the bank about it.

Case in point: a tourist came to Dubai for a one-day visit and left her credit card at the airport. The card went to the wrong hands and was used to make Dh9,000 worth of illegal purchases. The owner learned about the theft and her missing card only one month later.

So, there are two things credit cards could do to you. They could make your life easier, or could make your life disastrous. Sure, credit cards make spending money very trendy, but it's wise to think about the cons before getting one. And if you have one already, it pays to be extra careful, as the risk falls mostly on your shoulders.

Credit card firms automatically raise debt limits for one obvious reason. They know that if they increase the credit limit, the customer will be enticed to spend more. The more the customer spends, the more the company earns.