People buying gold at a gold jewellery in Deira. Picture for illustrative purpose only Image Credit: Ahmed Ramzan/Gulf news archives

Dubai: Gold and jewellery retail outlets in the UAE should not be charging on credit card-based transactions, and if they are it goes against strict directives issued by the UAE Central Bank and government entities in Dubai.

If any retailer still insists on charging, shoppers are within their rights to complain to the relevant authorities, according to sources in the local gold trade.

“There are severe penalties for retailers found imposing such charges, including a fine of Dh100,000 and that’s quite a deterrent,” said Cyriac Varghese of Sky Jewellery. “It was last year that the Central Bank issued the directive and, based on available evidence, all of the big jewellery chains are complying with the letter of the law.

“If there are still some individual outlets doing it, then it’s the responsibility of the shopper to bring it to the notice of the authorities.”

There are more than 450 outlets which sell gold and jewellery in the UAE. There is also a Gold and Jewellery Group in Dubai which has 180 members and are expected to ensure optimum transparency is maintained in the way prices are set and the way shoppers are billed. Local authorities make periodic checks of the outlets to ensure that the gold sold has been hallmarked and the weighing measures are in order.

“There is a clear directive from the Central Bank of UAE not to levy any additional fee to credit/debit card-holders,” said Shamlal Ahmad, managing director of international operations at Malabar Gold & Diamonds. “We strictly adhere to these guidelines laid down.”

Before the Central Bank directive, retailers were charging 1.5 per cent-1.75 per cent on transactions made using basic credit cards. It was higher on the premium cards. “The merchants have to pay a certain charge to the card issuer to effect a card-based transaction, and this is what they were trying to cover through passing on some of the charges to shoppers,” said a retailer. “The margins in the gold trade are extremely thin and retailers were using the additional charge to protect these.”

Apart from the Central Bank, government agencies in Dubai have also been active in getting retailers to stop the practice. That was to make sure gold and jewellery in Dubai would be offered at extremely competitive rates and in keeping with the emirate’s status as the ‘City of Gold’.

“After the Central Bank guidelines became law, what happened was the instant discounts that retailers used to offer were no longer there on card-based transactions,” said a retailer. “For instance, the practice was to round off the purchase price in favour of the buyer — now it only occurs on cash-based purchases.”

Based on retailer feedback, card-based transactions dominate the gold retail space. In many ways, it is reflective of the nature of the buyer demographic here. For those consumers seeking small-value transactions, it helps them to use their credit cards and thus avail of the longer payback period.

Where high-value purchasers are concerned, it is far easier for them to do so flashing their cards rather than tote fat wads of cash with them. The same logic applies to purchases by tourists, who represent a sizable base of gold buyers in a retail destination such as Dubai.

“It’s the nature of the jewellery and luxury retail business that plastic is favoured over cash; it could be due to the discretionary nature of the spending or the sheer reliability of carrying around cards as opposed to cash,” said a retailer.

“For gold retailers to forego the surcharges from card transactions might come at a cost... but when the laws of the land are clear-cut, there is no way out.”

Retailers who still insist on charging are clearly in violation of the laws, and it is for the shoppers to flag instances where there are clear breaches.