In recent years, local banks have experienced a significant surge in the use of credit cards, making them one of the primary banking products relied upon by individuals for both personal and business expenses. This increase stems from the extensive growth of the financial and banking sector, which has made credit cards a popular financial tool that is widely accessible.
The UAE ranks among the highest globally in per capita credit card ownership. This trend is driven by intense competition among banks, attractive marketing offers (such as travel miles and discounts), and a consumer-driven lifestyle. However, many consumers overlook the potential risks associated with this convenient payment method. While credit cards offer considerable benefits like facilitating transactions and building a credit history, misuse can lead to significant financial, social, and psychological repercussions for individuals and families. In light of this expansion, banking professionals in the country urge consumers to exercise caution when applying for these cards, warning that tempting offers may conceal substantial financial commitments.
Bankers emphasize the importance of thoroughly reviewing fees, interest rates, and legal obligations before agreeing to obtain a credit card. Additionally, avoiding repayment is neither practical nor safe, as banks have all legal measures in place to recover their funds, and defaulters can face strict local and international repercussions.
High Profit Margins
Banks impose interest rates on credit card users that can exceed ten times those of personal loans, making these cards one of the most profitable banking products for financial institutions. According to banking expert Osama Hamza Al-Rahma, the annual interest rates on amounts used from credit cards exceed 3% monthly — equivalent to about 36% fixed annual interest or roughly 65% diminishing interest. This renders the financial cost of using these cards significantly higher compared to other loans. Furthermore, high annual fees and cash withdrawal charges contribute to the overall steep cost for uninformed customers.
Enticing Offers
Customer testimonials indicate that certain banks employ captivating offers to attract clients, often without fully disclosing the underlying financial obligations. For instance, employee Hamad Al-Awadi recounts being offered a card valued between 20,000 and 25,000 dirhams alongside promises of discounts and air miles, without clarity regarding the interest rates or withdrawal fees. Similarly, engineer Hussein Al-Shamsi acknowledges that while privileges may seem appealing, it is crucial to manage card usage to avoid high penalties and interest. Experts warn that word-of-mouth marketing can lead customers into financial traps, as additional undisclosed fees such as annual charges or over-limit fees may later be imposed.
Regulatory Framework
The UAE Banks Federation’s code of conduct mandates that all promotional materials for banking offers be presented clearly and without deception, although this code is voluntary and not legally binding. Mohammed Muharram from the customer service department of Abu Dhabi Commercial Bank highlights that cards issued by banks represent a commitment and not a reward, necessitating cardholders to monitor their monthly payments, annual fees, and other costs. Conversely, Mina Sobhi, an employee in Dubai, notes that some clients fall victim to fraudulent practices due to ignorance of the card’s usage terms, especially when opting for full cash withdrawals instead of using the card for purchases.
Flexible Conditions
To obtain a credit card in the UAE, applicants typically need to be at least 21 years old, earn a monthly salary of no less than 5,000 dirhams, or have a credit limit of at least 3,500 dirhams, along with valid residence for expatriates. Banks also require supporting documents, including an ID card, passport, bank statements from the last three months, a salary certificate, or a trade license for freelancers, and possibly a guarantee check.
The application process can be completed digitally through smartphone applications or direct links to bank websites, ensuring that all documents are clear to avoid delays in processing.
Interest Rates
Interest rates on credit cards vary between banks based on the type of card: Gold, Platinum, or Travel Rewards. Banking experts warn that over-limit fees can greatly increase the cost of using the card, particularly for customers lacking sufficient financial awareness.
Strict Penalties
Defaults on repayments can lead to severe legal actions, as stated by legal consultant Dr. Hossam Lotfy, who explained that banks can pursue defaulters through civil courts, seize assets, or restrict travel. The use of checks as a legal pressure tool is also possible. Initially, banks typically adopt friendly measures, offering defaulters a three-month grace period before escalating to recovery or legal management techniques.
Dr. Lotfy emphasized that in cases of non-payment, a criminal report can be opened if a guarantee check is involved, potentially resulting in imprisonment or asset seizure. Moreover, clients leaving the country can be pursued for their debts via international collection agencies or Interpol, making escape practically impossible. Financial experts assert that legally and financially, banks maintain a position of strength.
Banking expert Hassan Al-Rais noted that while banks provide financing to assist clients, they will take necessary actions to recover funds if a defaulter demonstrates a lack of commitment. He advised customers to monitor their financial obligations monthly to avoid penalties and recommended against holding multiple cards concurrently to simplify payments. Clients should ensure they meet the requirements of the card before applying and, in case of default, reach out to the bank for amicable resolutions before legal action ensues. Furthermore, it was highlighted that defaulting can impact a client’s credit rating, which will be reported to the UAE Credit Bureau, accessible to all member banks that have authorized clients, revealing payment behaviors and credit scores. A poor rating can hinder a client’s ability to secure any further credit until improvements are made.
On this matter, banking expert Awaatif Al-Hermoudi stated that the belief one can flee from financial obligations without consequence is entirely mistaken, as a defaulter loses their reputation, credit evaluation, and future opportunities, in addition to facing protracted legal measures for debt recovery.
Cases of Default
To illustrate examples of defaults, one case involves an employee who maxed out a 25,000-dirham credit card for cash withdrawals, unaware of the 2.25% monthly interest rate and 3% over-limit fees. After two months, he found himself indebted to the bank for more than the original balance, necessitating negotiations for a repayment plan over 12 months. Another example is a freelancer who received a 100,000-dirham card but failed to meet the minimum payment requirements, leading to penalties and extra fees. The bank initiated friendly measures for two months before escalating the matter to legal management, resulting in asset seizures as per the signed contract. There is also the case of a “defaulting debtor fleeing abroad,” where a client attempted to leave the country after securing a personal loan, prompting banks to enlist Interpol and international recovery agencies, leading to a substantial recovery of funds through legal processes and international cooperation.
Recommendations
Banking expert Osama Hamza Al-Rahma underscored the importance of clients understanding how to use credit cards, as every financial product carries both positive and negative implications depending on usage. He noted that credit cards function as loans, and therefore, interest rates associated with them due to risks typically start at 3% monthly and can exceed that rate, potentially reaching annual rates of 40%, making the cost of credit burdensome. Customers should refrain from acquiring credit cards beyond their repayment capacity, as these cards are modern payment methods that provide secure electronic transactions and facilitate financial dealings, including travel reservations. However, awareness concerning credit implications and interest rates is crucial.
Personal Loans
Recent data published by the UAE Central Bank indicates that banks operating within the country disbursed personal loans for “consumer purposes” amounting to 18.3 billion dirhams in just three months, specifically from the end of December 2024 to March 2025. As a result, the total value of personal loans aimed at consumer needs reached 520.6 billion dirhams by the end of March 2025, marking the highest level in its history compared to 502.3 billion dirhams at the end of December last year.
Recommendations
Banking experts recommend several measures that protect cardholders and maintain their credit history at a high level, including increasing financial literacy by carefully reading contract terms before signing. Using the card as a payment tool rather than a loan and ensuring full payment of the balance each month to avoid interest is also essential.
Moreover, experts advise adhering to a monthly budget and not exceeding financial capabilities. In cases of existing debts, customers should contact their bank to restructure repayments or consider debt management programs offered by various organizations in the UAE.