By Courtney Trenwith
How my bank tried to put me in a financially risky position by tripling my credit card limit without even asking me, writes Courtney Trenwith
I recently received a text message from my bank that literally made me gasp. Emirates NBD was informing me that my credit card limit would automatically be almost tripled – without seeking my approval.
Yes, almost tripled and without any consultation to see if I a) wanted such a limit, b) needed such a limit, and c) could afford such a limit.
The bank then suggested that if I didn’t like the change they were going to make to my financial situation I could send them a text message. No questions, just a blunt statement.
The message read: “The Credit Limit on your card ending 2657 will be increased to AED 58500. If you do not want a limit increase, please SMS NOCLI to 4456 by 06 July 2014”.
My limit at the time was AED 20000. So they were planning to increase it by 192.5 percent.
Upon reading the fine print of my credit card contract, I discovered the bank gave itself “absolute discretion” to set my limit and that it only “may notify” me. So it was some small consolation I guess that they bothered to notify me at all of the credit boost they were awarding me.
“The Bank reserves the right to reduce or change the Card Credit Limit at any time without notifying the Cardholder”, the rest of clause 2.3 states.
That is an absolutely irresponsible policy I believe.
Since obtaining my card about 18 months ago, I have never reached my limit, nor had difficulty paying off my bill on time – which had I not done so would have been indications that I might need or want a credit limit, although asking would still be the polite and responsible way of conducting business.
The situation is made even more staggering when you consider Dubai’s history with extravagant personal debt levels.
Consumer debt in the UAE reached $95,000 per household, or $114bn in total, according a Strategic Analysis study published in July last year.
The ratio of debt-to-income was far greater than the majority of European countries and the US.
Almost half of those polled also said their monthly income was not enough to cover their repayment obligations, with 60 percent saying a quarter or more of their salary was spent on paying back debts.
In 2010, reports showed UAE debt levels had soared by 10 times in the past decade.
The reason? Lax lending policies.
It might be legal, but decisions by banks such as that by Emirates NBD in my case this week, only serve to entice customers to swipe their card more often, fuelling what is already an absurd level of debt for a country of less than 10 million people.
Receiving a text message letting you know you will soon be able to put almost three times as much on your credit card is the same as saying ‘it’s okay to spend with money that doesn’t exist’.
Well it’s not okay, and a bank should not be subtly enticing customers into such risk. At the very least, it should have called me to ask if I wanted the increase – and only after having done their own due diligence to make sure I could afford to repay such a high debt.
I asked Emirates NBD on Tuesday afternoon what due diligence they took before trying to automatically almost triple my credit card limit and why they believe it’s okay to do so without asking me.
I’m awaiting a reply. If and when I receive it, it will be posted here.
*RESPONSE FROM SUVO SARKAR, GM, RETAIL BANKING & WEALTH MANAGEMENT, EMIRATES NBD:
convenience and satisfaction is of paramount importance to Emirates NBD, and we
are always on the lookout for ways to provide additional value to our customers
in terms of products and services.
Credit Limit Increase is one of the tools we use today to
understand and reward positive customer behavior. This facility is
offered to customers based on their credit card performance and/or long
standing relationship with the bank. The
customer’s credit history with the bank along with the spending and repayment
patterns are considered in great detail, before the credit limit increase on
the card is initiated.
At Emirates NBD,
we follow a well-defined approach to ensure that the highest level of diligence
is rendered while choosing these select customers. The credit limit increase is
also effected during specific periods like pre-summer travel, or at the advent
of festive seasons like Eid or New Year, during which time customers are
interested to avail of some incremental borrowings to take care of their
The offer of
increase in credit limit is therefore seen by customers as a positive move.
Consistent customer feedback also suggests that they often look forward to
receiving the benefit of an increased credit limit based on factors like
inflation, salary increments, etc.
Once the due
diligence is completed and the decision taken to offer a customer increased
credit limit, the customer is informed via an SMS message about the line
increase. The message also offers customers the option to opt out within a
limited period, in case they do not wish to take advantage of the same.
In addition to
this notification, the available credit limit is also stated in the SMS
notification that customers receive on completion of every card transaction,
enabling them to conveniently track their card spends. Additionally, the credit
limit available to the customer is stated clearly in the credit card statement
that is sent to the customer each month.
Emirates NBD is
aware that customers might be travelling, or may not have seen the SMS
notification. Hence, we do acknowledge requests to downgrade limit to original
levels, even at a later stage. Once the customer informs the bank that he/she
does not need a credit limit increase or needs a lesser increase, we promptly
action the same.
Rewarding customers with a credit limit increase on the
basis of previous customer behavior and a positive credit history of spend
patterns, is a global practice today in all leading banks. We believe that this
increase in credit limit does not put the customer at unnecessary financial
risk, because it is a considered decision and not offered to all customers.
customers can also proactively seek an increase in their credit limit through
approaching the bank directly with relevant supporting income documents for us
to evaluate and approve the same.
Three things that you need to know:
1. You are an adult;
2. You agreed to the credit card policy;
3. You are responsible for your spending.
The bank does an evaluation before they provide you that offer. I am sure you managed your debt well and the offer came to you. If you dont want it, say you don't need it . Why worry about the bank and economy!!!!
It appears as if the customer is behaving like they have just come of a rehab that fixed their bad spending habits. Its so simple, you don't want it you return it. This is an extravagant society and the banks are just catering to it. Majority of people won't have a problem with that.
I was denied a credit card because I am a new owner to a new business in the UAE. Although I have sufficient balance in my bank account, they would still reject my application for a credit card as I have to wait for at least two years. I had to wait for 9 months before I could buy a car on auto-loan. I think the Central Bank needs to revise its policies and adopt some flexibility.
Agreed. Sorry lady, this article is pointless. Many people, myself included, decide not to have credit cards whatsoever, precisely because of the 'fine print' that comes with it. You do know that you CAN function without a credit card at this day and age? In fact, Emirates NBD offers a simple debit card that you can use instead of cash (I have used it in hotels, restaurants, ATMs and so on everywhere from US to Kazakhstan). Cut yours up, get a debit card and your "problem" is forever solved.
The response from ENBD is pointless and doesn't explain why the customer should do the bank's job.
If the customer wants the higher limit, then he/she should send a text message to the bank. It should not be that the bank would automatically raise a limit and then expect the customer to notify them if he/she doesn't want the new limit. These practices would not stand a chance in developed countries.
Read the article! She's not experiencing a problem or concerned about her ability or inability to handle a larger credit limit; she's complaining, quite correctly about the bank's lax policies.
Ms Trenwith, I suggest you also consider this. I have banked with ENBD for 15 years. As a result of having more than one business involvement, with income arising from several sources, I do not fit their mould and therefore cannot have a credit card despite having an average balance of over AED 250k on current account. I was as flabbergasted as you last week when the bank pestered my wife (who does not work) three times in one day to persuade her to have a credit card!
Unfortunately they are all the same and rely on customer intransigence and apathy. My patience snapped this morning after waiting 8 days for a simple reference. Ultimately the best strategy is to vote with you feet, as I did today and took 98% of my cash out of the account.
I had the oposite problem in 2008 when HSBC bank decreased my limit from AED 40K to AED 4K without notifying causing me to be embarassed when my purchase was declined. They even had the cheek to charge me a penalty because I was over my "limit" because I had an outstanding amount of about AED 5K. After complaining they eventually withdrew the penalty but still didn't give any apology and just stated that the reason for the reduction was that I worked in construction.
Stephen, you did the right thing in voting with your feet. But are you confident that your new bank is any better than ENBD ?
I have lived in Dubai several years and changed my bankers a few times because I was not happy with their sharp practices. However, I have come to the conclusion that they are all the same and really I do not have a choice.
@Courtney. This may come as a surprise to you but banks thrive on debt. Interest and fees are their main source of income and they are always looking for ways to increase their revenue stream. As such, one shouldn't be surprised to see such methods that are designed to help them grow their business. However, it is our responsibility as mature consumers to resist the temptation of easy credit and decline the offer. At the end of the day, the bank cannot force you to accept the limit increase. Just say no!
A couple of years ago Amex upgraded me because I was a "good" customer and I deserved to "be able to spend more".
The banks and the customers should be blamed, the banks for miss selling and for distorting and twisting the banking rules and regulations to serve their own selfish motives and the customers for being so gullible. I have been a victim of miss selling and the only remedial measure was by naming and shaming them in the press, nothing else works.