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17 April 2024

UAE residents beat debt-trap with all cash strategy

By Shuchita Kapur

An increasing number of UAE residents believe an "all-cash diet" is best suited to them, reveals an Emirates 24|7 online poll.

It is a strategy, they believe, that works best to cut down on credit card debt in a “shopaholic” and “upgrade” environment.

Even though the majority of the respondents in the country own credit cards, surprisingly, 35 per cent of those who participated in the poll, say they don’t use plastic to make purchases online or in real time.

These are the people who dread the high interest rates that credit card companies charge if you fail to make payments on time.

The concept of buy now and pay later does not attract many in the country.

“These are just ways to entice the customers and there are deals everywhere. Why get carried away? I don’t have a credit card and only buy what the money in my wallet can,” says one respondent.

Next are the 27 per cent of residents polled, who claim to use only one card.

“I use my credit card but only for the fixed and big purchases like online airline tickets, car insurance premium and a few other things.

“I don’t use it at the grocery store or in the mall. This helps me manage my finances better,” wrote a Dubai resident.

The rest of the participants use more than one credit card – a good 17 per cent say they use two cards, 10 per cent three and 11 per cent say they have four and more credit cards in use.

According to reports, the average annual percentage interest charged on credit cards issued in the UAE is 37.75 per cent.

And, many in the country use their credit cards to make loan repayments, a sure way to get into a debt trap.

A report released by compareit4me.com, a UAE-based price comparison website, released last year shows that 20 per cent of the people they polled made use of a credit card to cover repayments on a personal loan or car loan, exposing them to very high interest rates – warning signals to cut on plastic and go on an all-cash diet this year.

A quick look at shows interest rates that banks charge on credit cards.