By Ambareen Musa
Five of these lesser-known credit card fees that you need to know about
If you’re a credit card user in the UAE, there are a few fees and charges that you may not be aware of. These aren’t your usual suspects like interest rates, annual fees and late payment fees, but those that often slip under the cardholder’s radar.
The Souqalmal.com team rounds up five of these lesser-known credit card fees that you need to know about.
Do you see a small fee titled ‘Credit Shield’ pop in your credit card statement every month? Most cardholders don’t understand what it means, in fact, many may not even remember ever signing up for it.
Credit Shield is an insurance cover that will help repay the cardholder’s outstanding balance in case of death, disability or critical illness and involuntary loss of employment. However, it doesn’t insure you against credit card fraud.
It’s a nice little perk to have, but like most others, it doesn’t come free. The credit shield fee (or monthly premium) across most banks in the UAE varies from 0.5 percent to 0.99 percent of the outstanding balance.
Cash advance is technically a cash withdrawal at an ATM using your credit card. However, unlike withdrawing money from your own bank account, a cash advance involves borrowing money from the card provider. Depending on the credit card you have, you may be able to withdraw up to 50 percent to 80 percent of your credit limit. And it doesn’t come cheap!
In the UAE, the cash advance fee levied by most banks and credit card companies is 3 percent of the cash amount withdrawn, which is effectively 3.15 percent inclusive of VAT. On top of this charge, some banks also charge a higher monthly interest rate on cash advance, which can be anywhere around 0.25 percent to 0.75 percent higher than the interest rate on normal retail transactions.
Exceeded your credit card limit? Whether this happened intentionally or by accident, you may see a hefty new charge in your next credit card statement. Consider this ‘over-limit fee’ as a penalty for going over your credit limit. This fee can range between AED 200 and AED 300, depending on your card provider.
It doesn’t just stop there. Exceeding your card limit will also have a negative impact on your credit score. The best way to avoid the repercussions is to keep a close tab on your credit card usage.
Is credit card interest draining your savings? Balance transfer could be the solution you’re looking for. Almost all credit card providers run offers that allow you to transfer your current outstanding card balance to another card at a significantly lower or even zero percent interest for a limited tenure.
Balance transfer is great feature for those looking to reduce their credit card debt faster and more effectively. But if you’re planning to make the switch, beware of the fees. Banks charge a processing fee for balance transfers, which could be 1 percent to 3 percent of the outstanding amount transferred. On top of that, there may also be additional cancellation and early settlement fees applicable.
Most cardholders are aware that card providers charge a foreign transaction fee when they swipe their card overseas. But many don’t know that there’s another cost involved every time they choose to pay in their home currency. While this isn’t a fee per se, it is a cost all cardholders must be aware of.
Most of you would have encountered this situation while using your credit card abroad. The merchant asks if you would like to pay in the local currency or your home currency. You choose the latter, because it’s familiar and you instantly get to see the actual cost displayed in Dirhams. Big mistake! Here’s why – you will be charged an unfavourable currency exchange rate determined by a foreign third-party operator, which will unnecessarily drive up the cost of your purchase. And you’ll still be paying the foreign transaction fee determined by your card provider.