What are the different types of credit cards available in the UAE?
While there are no general fixed definitions of types of credit cards available, based on the kind of key feature or the reward they offer credit cards available in the UAE can be broadly classified into some categories. It is useful to have a basic understanding of these types to determine which card is most suitable for your specific needs.
Cashback credit cards
Cash back credit cards are credit cards that offer the user a benefit of earning back a percentage of his or her spend on the card through a direct cash back credit. For example, if a card offers you cashback of 5% on all supermarket spends and you use this card in a supermarket for AED 1,000 in a particular month, the bank will give you a credit of AED 50 (5% of AED 1,000) in your next credit card statement. This means that you have effectively saved AED 50 and your supermarket spend only actually cost you AED 950. Cash back credit cards can be very useful in helping you maximize your savings by simply using your credit card.
Rewards credit cards
These are credit cards that offer their users a benefit in the form of rewards points (or Air Miles) against purchases made by them on the card. The type of rewards offered can vary from points that can be redeemed against mall shopping vouchers, dining discount vouchers, air miles and so on. The value of rewards earned and the process of earning as well redeeming the reward points can vary significantly not just from bank to bank but also within different credit cards offered by the same bank. This can make it very challenging for the lay person to understand which offers the best rewards program that is most suitable to him or her. Using a credit card comparison website such as Soulwallet will help narrow down the choices for you.
Balance Transfer credit cards
Many banks in the UAE allow customers to transfer a balance outstanding from another bank’s credit card to a credit card of their own. The benefit they offer to customers for doing this is a lower interest rate on the balance transferred, typically for a specific period of time. For instance, if you have an outstanding amount of AED 10,000 due on your credit card and are unable to pay this up in full you could consider moving this balance to a balance transfer credit card of another company which offers you a lower interest rate. Doing this will help you potentially save a lot of money depending on a few factors. These include the rate of interest in your existing credit card versus the rate of interest offered on the balance transfer credit card; the period of time with the lower interest rate offered on the balance transfer credit card; and the time horizon by which you believe you will be able to pay off the total amount outstanding.
Balance transfer credit cards can be very useful in helping you reduce your overall credit cards interest debt. Many banks even offer 0% interest for a short period of time which can save you several hundred dirhams based on the total amount you have outstanding on your credit card.
Islamic credit cards
Islamic credit cards were introduced because ribaa (the Arabic word for interest) is forbidden in Islam. These cards work a bit differently from conventional credit cards. One format offered by several banks is that of a “profit rate”. Here, instead of the customer paying interest charges, he or she is effectively paying an additional amount or “profit” to the bank for every purchase made on the credit card. It is very similar to the concept on an interest rate but the ideology is that the user is incurring a “profit” fee for services enjoyed by using the credit card.
Another format of an Islamic credit card offered by some banks in the UAE is a monthly fee-based credit card. Here, instead of paying interest charges for each purchase the user only pays a fixed amount or a fixed fee each month for using the credit card. This fee is payable irrespective of the amount used on the credit card.
Business credit cards
Business credit cards are issued to small and medium sized businesses to offer them the access to more working capital to fund their operations by providing short term credit for various official expenditures. These are different from corporate credit cards which are offered to large established corporates based on the company’s credit profile. In contrast, business credit cards are issued to the owner or proprietor of a small or medium sized business based on his personal credit profile.
These cards are useful to help the owner gain more access to working capital, make payments to suppliers through the card rather than a personal check, give access to employees to the credit limit by issuing them separate supplementary credit cards, to earn reward points on regular expenditure of the business, enable the owner to separate his or her personal and business transactions, keep a record of official expenditure made on the credit card through the credit card statements and so on.
While the credit card is issued to the owner for use in his business, the owner is liable for all charge incurred on it irrespective of the performance of the business. Hence, while enjoying the many benefits of the credit card, the owner also needs to ensure he manages it as he would his own personal credit card to protect from any fraud and other liabilities.
Travel credit cards
Given its location and large expatriate population, the UAE is a hub for international travel not just regionally but globally as well. A significant proportion of residents travel internationally very frequently either for business purposes or for tourism and banks in the country have seized on this opportunity to offer residents credit cards featuring various benefits related to international travel.
Travel credit cards offer users travel related rewards and benefits such as air miles that can be redeemed against flight tickets, reward points that can be redeemed against hotel room bookings and so on. In addition to the rewards that these cards offer, they also offer customers various other travel related benefits such as free travel insurance, free visa processing fees, emergency cash replacement, emergency medical insurance and so on. Some banks have even got into arrangements with large travel related companies to offer customers benefits such as discounts on every booking made using the particular travel company and so on.
As with all the other types of credit cards, travel credit cards also vary significantly in their rewards offerings and value proposition for customers. Understanding the benefits offered by each travel card and identifying which card is most suitable to your specific travel spends and needs will help you maximize the benefits that can be enjoyed by using these cards.
Premium credit cards
Premium credit cards offer customers not only certain key benefits in the form of specific attractive rewards such as Ari Miles, Points and so on but also many ancillary benefits such as complimentary premium lounge access at various international airports, complimentary access to golf courses, free offers on cinema tickets, complimentary offers on valet parking, special features such as purchase protection and extended warranties for purchases made on the card. Premium credit cards almost always carry reasonably high annual fee charges but at the same time can also offer significant value to customers if their features are utilized effectively. Many banks also impose minimum monthly salary eligibility criterion for such credit cards to add to their sense of “exclusivity” in the credit card marketplace.
Standard or Plain Vanilla credit cards
Almost all banks offer customer Standard credit cards which do not carry any annual charges but also offer only very minimal benefits in terms of rewards and other features. Standard credit cards are usually offered with relatively low credit limits. While they do offer users the advantages of a credit card as opposed to using cash, they do not offer very much else. However, for customers in lower income brackets or for customers who want a credit card with a very low credit limit for any particular reason these cards can prove to be a useful alternative.
