Issues: What matters is the fine print

Terms and conditions in the fine print have always been a controversial issue when it comes to unsuspecting persons dealing with banks – or any financial institution, for that matter.

Though we have been hotly debating about how transparency can be established and improved in each and every system, especially in the financial services industry, we see ways being designed to hide things from those who really deserve not to be victimised by the system's sophistication.

Unfortunately, these practices are considered to be legitimate and are being followed by everyone from small firms to multinationals with little hesitation and inhibition.

See for example advertisements being taken out regularly to sell investment products.

It has become a well established practice to publish the size of returns and the assurance on such returns in big numbers.

But the terms and conditions dumped somewhere else will tell you the exact scenario which warns one of the risk involved and exact pattern of returns the investors are entitled to.

We even come across advertisements which are meant to mislead the readers on issues like making investment decisions.

In the credit-card business too, how many banks advertise the actual rate of interest charged per year when the fact remains that the interest is generally expressed as the amount charged for an year.

Another thing which might be escaping the attention of credit-card users is how the banks charge interest on the cardholders' debts.

Many still believe that banks charge interest only on the unpaid portion of the credit-card purchases in a month.

Take a scenario: one makes purchases to the tune of Dh3,000 in a particular month using a credit card. Say he was able to settle the outstandings on the due date, to the tune of only Dh2,500.

If anybody believes that the bank would charge interest only on the remaining Dh500 he is wrong.

Most banks, or all banks?, would charge interest on the whole Dh3,000 even if the cardholder settled the outstanding to the extent of Dh2.500.

So cardholders are always advised to pay off the whole bill or try to pay the bare minimum of five per cent of the outstandings only.

The same situation applies to expressing interest rates on personal loans.

There were complaints from some quarters that some banks juggle interest rate terminologies of 'flat rate and reducing balance'.

It was some time back, the Central Bank of UAE asked banks to notify the rate of personal loans at the bank premises.