Credit cards are hit by the credit crunch
Many people would rather pull out their own teeth than rack up spending on credit cards, but packing a flexible friend in a wallet or purse is a necessary evil in the UAE .
Without the likes of Visa or Mastercard, simple tasks such as paying for shopping or booking a flight online would be impossible.
Debit cards, while common in the rest of the world, are still far from ubiquitous in the Emirates – despite the fact they are as simple to use and allow people to keep a better track on their spending. Too often, credit cards in the UAE were given out relatively freely and with preposterous spending limits, but all that has changed, as we reported exclusively last week.
Banks and lenders, often without warning, are slashing the limit of personal credit cards – sometimes by as much as 80 per cent – and the reasons are all too obvious.
As banks step up their efforts to control consumer over-indulgence, the level of funds available on plastic is being slashed.
Equally, as jobs are lost and people leave the UAE, nervous banks do not want their customers maxing out their cards before they head reluctantly to the airport.
The decision to reduce credit has been dubbed limit rationalisation by UAE lenders, who say the move is based on factors such as income, spending habits and repayment behaviour.
Allocating limits for new customers follows the same guidelines, but is simpler to execute, they say. "Given the scale of the meltdown in the financial and real estate markets, it is natural to expect an escalation in the level of impaired assets in the cards business," said Vimal Kumar, Cards Business Head at Mashreq bank.
"In the UAE, although direct exposure to toxic assets was limited, it nonetheless had a cascading impact on liquidity and slowdown of economic activity."
Barclays' Head of Credit Cards, Zeeshan Saleem, todl reporter Safura Rahimi: "Limit reduction is a potent tool in pre-empting stress for the borrower while limiting the lender's exposure – a situation in the interest of both parties."
He said the bank had ensured clear and early communication to all customers of changes to their credit limits.
Elsewhere in our ranking of the best-read stories was our overview of the Dubai Government's $20 billion (Dh73.4bn) bonds issue – what it means to the emirates, and the global factors that led to the decision. The print edition of the story was accompanied by a comprehensive illustration, charting major financial events from the collapse of Lehman Brothers in the autumn of last year to Dubai's bonds issue. Running through the useful timeline was a chart that plotted the rises and falls of the Emirates' two bourses over the past six-plus months.
Finally, and coming in fifth in a ranking of our best-read stories, was an in-depth look at defence spending among Arab nations.
Published on the closing day of the Idex defence expo in Abu Dhabi, the story said the combined Arab budget allocations on defence security and justice exceeded $480 billion between 2002 and 2008 and the bulk of such allocations have been made by some of the wealthier Gulf oil producers.
- Read more at www.business24-7.ae/weekend
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