x Abu Dhabi, UAEMonday 22 January 2018

The good, the bad and the ugly of credit card offers

On the Money With lenders jostling to attract customers with deals and value-added services, it is possible to find a card that you can make work for you.

Gary Clement for The National
Gary Clement for The National

It might sound a little boring, but I am what you could call a cautious spender, especially in this day and age.

Since the global financial crisis, I've embraced the age of austerity in more ways than one after seeing millions of people around the world lose their homes, their jobs, their cars and their lifestyles to the credit crunch, which many had achieved by overextending themselves.

I prefer quality over quantity and if I don't have the cash, then I usually won't buy it. I say usually because most of the time, I do my best to embrace the austere lifestyle that I've adopted.

But there are times when we, sorry, I, suffer moments of extreme weakness and there's something - usually totally unnecessary - that I Just. Can't. Live. Without.

Take this week, for instance, when Abdul, my carpet guy, turned up at my door with his latest wares tossed over his shoulder.

Unfortunately, he's becoming a little too familiar with what I like, from the designs to the colours, the origin and the size of the carpet he believes I should be placing under my dining table, for instance.

And this is what he'd turned up with this time. A carpet he thought would look great under my dining table. And as much as I hate to admit it, he was right. Yet again.

He catches me out every time, but I suspect that this has more to do with his skills as a salesman than my ability to Just. Say. No. Especially this month, having already forked out thousands of dirhams in school fees for the final term of the year.

One good thing about Abdul, however, is that he doesn't take credit cards. So this lack of service eliminated all temptation for me to simply flash the plastic fantastic and then pay it off over time, a major rule breaker in my austere living strategy because of the high interest rate it would garner.

Credit cards in the UAE offer, or I should say, slug consumers with some of the highest interest rates in the world.

At an average rate of about 32 per cent per year (at least that's what my bank charges me here), that's a high price to pay for something you think you just can't live without, but no doubt can.

Depending on the type of person you are and your spending habits, credit cards can be good, bad - or just plain ugly (just ask those people who lost everything during the financial crisis).

In an emergency, they can save the day. But a credit card is also capable of getting you in serious trouble if you miss your payments. If you fail to make a payment on time, you are hit with a late fee, not to mention the high interest that is added if you don't pay the card off in full at the end of the month.

But is there a way to make a credit card work for you? And how do you choose the best one that suits you, your family and your lifestyle?

Rule number one when it comes to credit cards is to pay off the balance in full every month. This strategy is a no-brainer. What is the advantage of doing this? Many banks offer 55 days of interest-free credit on purchases if you settle your outstanding balance in full each month.

Make the card work for you, should be everybody's motto in life.

When you are choosing a card, check if it is "free for life", or does it charge a yearly fee, on top of the interest. Does it offer any other extras, such as travel insurance, air miles, an extended warranty or protection of the goods you've purchased? What is the interest charged on cash advances?

There is a lot to consider when you apply for a credit card. And with lenders jostling to attract customers with, what they term, a range of deals and value-added services, it is possible to find a card that you can make work for you - rather than allowing the bank to gouge you with high interest rates and late-fee penalties.

To do this, though, it is essential you never deviate from rule number one when it comes to credit cards: always pay your balance off in full every month. I know I'm being repetative, but I can't stress enough how important this is.

If you must have a credit card, ensure that you know the difference between good credit and bad credit. Why? It means you probably won't go wrong in a world that is still recovering from the domino effect of the credit crunch.

And in the meantime, I am sticking to cash, especially when Abdul turns up at my door with another carpet that he knows I just can't live without.