Plastic the preferred choice

There are currently 2.5 million credit cards in circulation in the UAE among a population of about 4.5 million

Although credit cards are fast becoming indispensable, experts advice reading the fine print carefully.

The UAE credit card market is rapidly expanding, with banks offering credit card options to suit every need.

"There are currently about 2.5 million credit cards in circulation in the UAE against a population of about 4.5 million. It is generally believed that the UAE credit card market is growing at 15 to 16 per cent per annum," says Anil Chander, Head of Cards, RAKBank.

Due to the dramatic economic development in the UAE, the credit card market is witnessing substantial growth.

This means that competition is intensifying between both local and international banks that are striving to take advantage of the growing opportunity to gain more customers.

Chander says, "From a predominantly cash-based society, the UAE continues to evolve and mature with ever-increasing consumer demand for credit to support lifestyle needs.

"There is therefore an increasing opportunity to switch customer spend behaviour from cash to card.

"This, along with the fast pace of growth in the UAE means there are an increasing number of existing and new residents who are becoming eligible for credit cards. Therefore, there continues to be a significant opportunity for UAE banks to increase card penetration and grow their credit card portfolio."

Larger variety
This is good news for consumers who, as a result of this favourable scenario, have an abundance of offers to choose from. There is now a wide range of credit cards to suit every lifestyle, budget and need, and the choices are set to expand further.

"With the growth of the credit card market, banks will need to come up with even better deals offering benefits suited to the needs of various customers. As the market matures, the customer will increasingly benefit from better card products and fairer interest rates," says Chris Balfour, Consumer Banking Director, Lloyds TSB Middle East.

Lloyds TSB offer both Gold and Classic Visa credit cards at 11.9 per cent per annum or 0.99 per cent interest per month; they do not have any annual fee and are free for life.

The cards are globally accepted and offer benefits like 24 hour assistance, easy repayment terms, 48 hour lost card protection, direct debit option, 90 days purchase protection, travel and accident insurance and up to 55 days interest free on purchases.

Gold Card customers receive additional benefits, including higher credit limits and commission free travelers cheques.

"We offer credit cards denominated in UAE dirhams, UK pounds sterling and US dollars through Lloyds TSB Dubai and Lloyds TSB International.

"Over the last couple of years we have introduced a number of market leading products and services which have redefined the way retail banking is conducted in the region. We offer the lowest credit card interest rate among all banks in the UAE," says Balfour.

RAKBank's most successful credit card promotion has been the launch of the 'Got Your 2?,' which offers up to two per cent cash back for RAKBank Titanium credit card customers. The MasterCard Titanium card is a first of its kind in the UAE, and caters to the premium customer segment.

Getting better
Additionally, based on the hierarchy of customer needs, RAKBank has the Visa Gold, Visa Classic and MasterCard Standard products.

"The high degree of consumerism and brand availability in the Gulf market has fuelled the need for financial products and services that offer the most value for money.

"Residents of the Gulf market are 'global' customers who belong to the mid to high income segment, and therefore are well aware of the latest trends in the financial products and services being offered across the world," says Chander.

A new UAE credit bureau is in the process of being implemented, and will impact the way decisions on credit card applications are made.

According to their website, 'Emcredit' commenced operations in November 2006. However, no announcements have been made with regards to when it will be fully effective.

UAE credit bureau
Credit scoring technologies are already in place around the world, and provide the basis of a stable financial system.
Credit bureaus primarily collect data on borrowers and provide it in real time to lenders, thereby supporting their decision-making processes. With competition intensifying in the UAE market, lending practices will become more aggressive.

"We expect that a successful implementation of the new credit bureau will have a positive impact on the banking sector and the credit card industry in particular, since some individuals carry multiple credit cards which are beyond their means for repayment.

"The new credit bureaus will help bring financial discipline and to improve the quality of credit decisions by the various banks," says Chander.

Fraud protection
With the worldwide cost of credit card fraud reaching billions of dollars a year, banks in the region are stepping up their fraud protection systems to help protect customers.

Credit card fraud in the United Kingdom alone is estimated at $830 million. Banks have various security measures in place to try and limit the risk of fraud. "HSBC has a state of the art card fraud detection system to detect suspicious card usage on credit cards.

HSBC card fraud detection works continuously, reviewing these alerts and making contact with customers to ensure that the customer interests are safe guarded," says Kamala Iyer, Head of Marketing and Products, Credit Cards Middle East, HSBC Bank.

In keeping with the EMV (Europay, MasterCard and Visa) mandate, there has been a shift towards chip and pin enabled cards in the region.

The EMV compliance will bring benefits to both card issuers and users, decreasing the threat of credit card frauds. ADCB is just one of the regional banks who have deployed the latest chip technology in order to prevent fraud proactively.

Chip technology
"At ADCB, we take the issue of fraud very seriously and have deployed the latest technology to prevent fraud proactively. The leading edge 'chip' technology makes it impossible to copy our card.

"Earlier this year, we also launched the first contactless card in the region - the ADCB 'Flash' credit card, with MasterCard's PayPass technology. Because the card doesn't leave the customer's hand, it adds an additional level of security, as the card cant be tampered with when making day-to-day purchases," says an ADCB spokesperson.

When ADCB 'chip' cardholders use their cards for regular purchases, they can 'Just Dip the Chip' to enjoy rewards at selected partner outlets.

For every dirham spent, cardholders also get 'TouchPoints' which is a first of its kind bank wide loyalty program in the region, and offers rewards that can be redeemed across some of the most prestigious outlets across UAE.

HSBC cardholders can enjoy a promotion called 'abracardabra' this festive season whereby they have access to a world of shopping benefits.

There are zero per cent interest installment offers with Damas, Joy Alukkas, Eros Digital Home, Switch, Harman House, Rivoli and Pan Emirates. Cardholders also can enjoy a five per cent cash-back offer on all international tickets booked on HSBC Cards using the HSBC Traveller service.