Is a credit card price war brewing in UAE?

The first salvo has been fired.

Announcing in big and bold – full page newspaper ads on Tuesday – Union National Bank (UNB) unveiled its ‘lowest interest rate’ offer on a UAE credit card.

As part of a limited period offer, the Abu Dhabi-based bank will charge users an interest rate of 0.54 per cent per month – that is easily the lowest interest rate on a credit card in the country, with rates from other providers ranging between 2.25 per cent and 2.99 per cent.

According to latest studies, UAE’s credit card interest rates are the highest in the Gulf region, and in recent moves, the UAE’s Central Bank has warned lenders against such high charges.

The central bank is reportedly mulling a cap on interest rates and fees that lenders impose on credit cards.

According to unnamed sources cited earlier in the year by some of the country’s Arabic dailies, the Central Bank is in the process of setting the maximum rate on unpaid credit card loan at 1.5 per cent per month, or 18 per cent as an annual rate on a par with other GCC countries.

High credit card interest rates have long been a bone of contention between lenders and borrowers in the UAE, with a number of aggrieved customers complaining about excessive and hidden charges that banks levy on them.

While the latest offer remains limited to just one provider, not to forget that it is a limited period offer after which UNB may revise its charges to match that of others, borrowers are hoping that this is the beginning of a credit card price war among the country’s lenders, with the customer emerging as the ultimate winner.

Will a price war among local banks to bolster their client base provide respite to UAE residents? Are you happy with your current credit card provider? Would you replace your existing card with another one that charges a lower interest rate? Let us know your thoughts in comments below.
 

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