Spend - and save - with debit cards

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Spend - and save - with debit cards

They are a useful aid to manage finances, while being convenient and inexpensive.

By Waleed Barhaji (Insight)

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Published: Mon 20 Apr 2015, 12:42 AM

Last updated: Thu 25 Jun 2015, 7:23 PM

The UAE has slowly and surely entered the next-generation digital finance age. On one end, the government has successfully launched a futuristic plan to integrate Emirates national identity cards with bank cards; while on the user end, savvy consumers have embraced the convenience and discipline of cashless transactions.

The memories and effects of the 2008 global economic downturn — which saw a big dent in consumer confidence, piling of personal debt and banking crisis — are all ghosts of the past. The post-crisis period in the UAE has been marked by steady economic growth, upgraded digital infrastructure and a boom in the retail, e-commerce and tourism sectors.

This upbeat mood is reflected in the financial cards sector, which has done a complete turnaround between 2009-23. The number of credit cards and debit cards in circulation rose from 10.3 million in 2009 to 18.2 million in 2013 — a compound annual growth rate of 15.31 per cent. Between 2014-18, the card-payment sector is expected to grow at a CAGR of 8.57 per cent to reach 28.4 million in another three years.

Peace and debit

The year 2008 was a significant period that brought about a drastic change in card-use patterns. The old habits of unfettered card use took a beating. Credit card usage plummeted in 2009-10, as debit card spending continued to grow, with consumers struggling to get a grip on their expenses and break free from debt. Singed by financial constraints and debts, people started paying closer attention to their spending habits, and debit cards offered a convenient way for them to ensure they didn’t overspend.

Extra caution

>      Ensure that online shopping websites are secure before you make any payments. Look for the safety padlock on the address bar or an https:// in the website address.

>      Never dispose of your card statements in the trash without shredding them first. Opt to have them sent to you electronically if possible.

>      If you pay for a restaurant bill with a card, either ask for a portable POS machine to be brought to your table or accompany the waiter to the payment terminal. Don’t be embarrassed to take such precaution.

>      Report suspected fraudulent activity to the proper authorities, including the police.

Banks also worked to raise awareness about the use of debit cards as safe and convenient. Unlike credit cards, debit cards withdraw money directly from the user’s account, without interest and are accepted at thousands of commercial locations across the UAE, and millions more globally.

Managing debt

This trend of increased popularity of debit cards can be seen internationally, as people become more cautious with their credit-related costs. With a debit card, you remain insulated from overspending, as you cannot purchase more than the available funds in your account. A debit card is thus an excellent financial instrument to help people manage their finances.

Banks allow customers to use their debit cards as long as they have money in their account, even if it’s below the minimum balance requirement. Once the floor balance is breached, the holder may be charged a penalty fee, which has been capped at Dh25 a month. To avoid paying these charges, always operate your account within the terms and conditions of the bank, and in order to avoid hidden fees, choose a reputable bank known for its customer service and transparency.

No profit, interest or fees

Debit cards are more practical than credit cards as they eliminate the need to pay profit or interest rates and monthly dues. These cards are issued without any charges, although there may be replacement fees in case of loss or theft of the card. This payment method brings peace of mind as customers know they are spending their own money and need not pay any profit or interest. Moreover, the legal difficulties associated with credit card defaults have also prompted many consumers to stick to debit cards. 

Rewarding experience

Debit cards, however, need not be a dull product dedicated solely to grocery spending. In fact, if used carefully, it can help you maintain a certain lifestyle. Debit and credit cards are evolving products that enable customers to enjoy a wide range of shopping, dining and travel options at millions of outlets across the globe and cash withdrawal at thousands of ATMs worldwide. For globe-trotting customers, the chance to avail of exclusive discounts internationally on their debit/credit cards is a highly-attractive proposition.

Financial cards with numerous add-on features can once again become an integral part of your leisure and luxury activities. From valuable sky miles to airport lounge facilities and resort stays, the points that you accrue from the use of your debit or credit cards can add extra zing to your life.

Alert customers who are frequent to heavy card users can avail of various attractive and intriguing offers that banks come up with from time to time. For instance, Noor Bank customers, who hold debit or credit cards, can win a two-night stay for two persons at several luxurious destinations. Other banks offer skyward miles for certain amount of retail spend. Various tie-ups between airlines and banks also ensure ticket discounts, flight upgrades and exclusive discounts at leading retail outlets in the UAE.

Be safe, be secure

This expanded use of financial cards no doubt makes life easier, but customers should never let their vigil down. It is important to be an informed consumer while dealing with debit cards as these too can be susceptible to fraudulent use. Debit cards do not carry the same protection as credit cards and it is important to treat your card as you would your cash. Banks have different policies, but when your card or account details are stolen, you can be liable for the losses incurred on a debit card.

It is important to protect details like the card number, expiry date and the card verification value code at all costs. Be vigilant about who is handling your card every time it is taken out of your sight for a transaction.

Also, remember to take the usual precautions of never sending card details via SMS, post or by e-mail, nor should you reveal your PIN to anyone. It is a good idea to retain receipts or sales slips so you can cross-check them against the card transaction appearing on your bank statement. If you see a charge or entry that you don’t recognise, contact your bank immediately.

The debit card is a vital product to manage modern-day finances — it prevents you from overspending, keeps you free from worry, and with careful usage, it can bring you the luxuries of life. 

The writer is the business head of consumer finance at Noor Bank. Views expressed are his own and do not reflect the newspaper’s policy.


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