Text size:

  • Small
  • Normal
  • Large
A new survey has found cash-strapped residents in the UAE are using their credit cards to pay their loan obligations. Joe Raedle/Getty Images/AFP
A new survey has found cash-strapped residents in the UAE are using their credit cards to pay their loan obligations. Joe Raedle/Getty Images/AFP

UAE residents risk maxing out credit cards to make loan payments

A UAE new study has found many are exposing them to interest rates around seven times higher and leaving many customers close to maxed out.

Hundreds of UAE residents are using credit card debt to make payments on personal loans, exposing them to interest rates about seven times higher and leaving many customers close to maxed out, a new study has found.

An online survey from compareit4me.com, a UAE-based price comparison website, polled 1,832 people on their consumer finance habits, finding that 20 per cent made use of a credit card to cover repayments on a personal loan or car loan within the past six months.

A total of 37 per cent of those polled said they had three or more credit cards, and among that group more than half said they had used up 90 per cent of their available credit.

“The results found in the survey were a big concern,” said Tom Davies, the operations manager at compareit4me.com.
“We found worrying trends with large portions of the respondents; trends which meant people were accumulating debt quicker than they could afford.”

Official consumer prices rose 1 per cent in May compared with the same month a year earlier. However, housing costs have risen at a much faster rate across the UAE – putting the squeeze on many consumers.

Although some customers had made use of interest-free balance transfers to lower their debt repayments, many soon found themselves utilising both credit cards and further building their debt loads, the survey found.

The findings point towards a large number of borrowers who spread personal debts across multiple banks.

Identifying these customers so that banks can make more informed decisions about who to lend to is one of the primary objectives of the Al Etihad Credit Bureau, which is due to start operational trials this month. Making use of expensive credit card debt to pay cheap personal loans “doesn’t make sense”, said one retail banker who asked not to be identified.

Customers who have taken out multiple credit cards may be forced to change their behaviour as the Al Etihad Credit Bureau becomes fully functional and some banks opt not to extend credit lines to those who have borrowed far beyond their means, the banker added.

Interest rates on UAE credit cards are significantly higher than many countries and other types of debt. The average monthly percentage rate on a UAE credit card was 2.9 per cent at the start of this month, equivalent to an annual rate of 41.1 per cent, according to data from souqalmal.com.

That compares with an average interest rate on personal loans of 6.1 per cent.

A credit card balance with an annual interest rate of 41.1 per cent will double every two years if the principal is not paid down.

A total of 42 per cent of respondents to compareit4me.com’s study said they made only the minimum payment on their credit cards and did not pay down the principal, with 45 per cent saying that monthly debt repayments were beyond their means.


Back to the top

More articles

Editor's Picks

 Would you like it in blue? An Afghan shopkeeper shows a burqa to a customer at a bazaar in Herat. (Aref Karimi / AFP /  April 13, 2014)

In pictures: Best business images for the week to April 24, 2014

Here are some of the best business images for the week to April 24, 2014.

 That's asking a lot: this four-bedroom duplex penthouse apartment  at Marina Residence in Dubai is for sale with an asking price of Dh15.7 million. (Courtesy Better Homes / April 2014)

In pictures: Palm Jumeirah penthouse listed for Dh15.7 million

A four-bedroom duplex penthouse in Marina Residence 3 on Dubai's Palm Jumeirah is on the market for Dh15.7 million.

 Room with a view from one of the 21 duplex penthouses located in the Gate Towers sky-bridge. The sports courts and swimming pools can be seen below. Courtesy Alda

In pictures: Aldar’s Gate Towers Penthouse Collection on Reem Island

Aldar launched its Gate Towers Penthouse Collection at Cityscape Abu Dhabi. The launch features 21 penthouses spanning the skybridge, with each having a private indoor pool and incredible views.

 Marina Square apartments Reem Island: Q1 2% rise. Studio - Dh65-68,000. 1BR - Dh75-95,000. 2BR - Dh110-145,000. 3BR - Dh170-190,000. Q1 2013-Q1 2014 no change. Sammy Dallal / The National

In pictures: Where Abu Dhabi rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Abu Dhabi have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.


To add your event to The National listings, click here

Get the most from The National