Having over 200 credit cards to select from, the borrowers in the UAE have become spoilt for choice. However, considering the different interest rates, rewards & cashback deals and introductory offers available in the market, selecting one credit card could get confusing. Choosing the right credit card for yourself is very important. Otherwise, you might have to bear high charges.
In the luxurious lifestyle of the UAE, a credit card comes in very handy. But there are a number of factors that you need to consider while deciding the credit card you choose. Listed below are a few of these factors.
Check the Annual Percentage Rate
For short-term spending, a credit card is a great option. But in the long run, it might prove to be an expensive way of borrowing money. The card providers may quote a competitive interest rate per month. When these rates are compounded up to the APR (Annual Percentage Rate), these figures may reach very high. A credit card offers amazing benefits and rewards. However, you truly benefit from one when you make your bill payments in time and save yourself from the repayment of hefty interests.
Decide the Benefits you are Looking For
When you are positive clearing your credit card debt monthly, it’s time to shift your focus on the benefits offered. The benefits may include air miles, cash back, cinema tickets, free golf days, prize draws, complimentary valet parking, VIP access to airport lounges, and transfers. Never ignore the interest rate as you might have to pay it in case you end up into financial issues or skip a monthly payment.
Be Careful of High Credit Limits
A high limit might be attractive, but you might end up in a debt trap that might arise if your credit limit exceeds your budget. Your credit limit should never be treated like a target. Some banks might exceed the credit limit, without notifying the customer about the same. Be careful in such situations, as it could cause overspending. Think thoroughly while selecting your credit limit.
Maintain Your Credit Status
With permission from the Al Etihad Credit Bureau, the banks can look up the existing personal loans and debts of the applicants. Excessive debt can cause harm to your credit score.
Consider the Annual Fees
Some credit cards are free for life, that is, they charge no annual fee. Others might charge annual fees as much as 2000 AED or above. It is worth paying higher annual fees only when you are getting juicy rewards and benefits.
Check the Foreign Exchange Rate
Credit card providers typically add on extra charges for international use, a certain percent of the transaction. For frequent travelers, it is ideal to select the card that charges low fees on foreign exchange and high rewards on international transactions.
Look out for Introductory Offers
Banks periodically promote the prime credit cards they offer. Examples of such promotions are bonus cash back, bonus air miles on signing up, no annual fee for the 1st year, free gift voucher and much more. Keep checking these offers while selecting a card.
Take Balance Transfer Cards into Consideration
A lot of banks in the UAE now let you transfer the existing balance on your card at zero percent interest for certain months. A no-interest period can be very useful for those who want to transfer a considerable amount of balance from their previous card account. However, you might have to bear a processing fee on your balance initially, and a monthly fee subsequently for a few years.
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Credit Shield Insurance
Credit shield insurance has been designed to waive off the balance on your credit card in case of death, serious illness, permanent disability, or any other unfortunate event. You can avail this facility for a certain extra fee per month. The fee is charged on your balance outstanding, and some of the policies may offer only the limited cover. If you maintain a small balance on your card or have savings for clearing your debt, you might not need this credit shield insurance facility. Some banks may apply this facility automatically, so if you do not need it, then ask your provider to remove it.
Terms & Conditions
While evaluating the rewards, check if there is any requirement of minimum spend. Apart from that, also check if the percentage of cashback the credit card offers is attractive, but the monthly redemption limit isn’t too low. You should also check if the eligible categories of spending include utilities and groceries. You should also be aware of the expiration of the air miles. Decide on your credit card only after reading all the terms & conditions related to it.
The Bottom Line
It is advised that you do not take any decision on your credit card in a hurry or else you might end up in serious financial trouble. Consider all the factors mentioned above carefully and then opt for the card of your choice. Select the one that suits your budget, lifestyle as well as your aspirations. Make sure you manage your credit card well so as to save yourself from a potential debt trap.
Shehbaz Malik is a Computer Science Graduate a professional blogger, content writer, an SEO expert. He loves to write about well being, health and fitness, and Tech reviews of emerging products.