No discount for credit card holders on gold!

DUBAI - If you are buying gold through a credit card in the UAE you just might find yourself in a sticky situation.

By Debasree S.

Published: Fri 2 Jan 2004, 12:25 PM

Last updated: Thu 2 Apr 2015, 2:14 AM

The salesman might backtrack on the discount that he just offered you, if you produce a credit card at the counter instead of paying in cash or simply you might be asked to pay 2 to 2.75 per cent extra on the purchases made on gold.

The reasons are simple: All retailers have to pay between 2 and 2.75 per cent as commission to the banks and since most of them sell their ware at a profit even less than three per cent, they have little option than to recover the money from the clients themselves. Many UAE residents have been at the receiving end of such deals, much to their surprise.

Says Farooque, who bought gold for his wife from the Gold Souq last week: "I was surprised that the salesman, who was prepared to give me a substantial discount, said he could not after I told him that I was going to make the payment through credit card."

The issue boils down to the profit margin that gold retailers manage to make on each item. If anyway an item is priced very low, a person paying through credit card will have to pay extra. It cannot be expected that gold retailers should incur a loss because people pay through the credit card, argue the retailers.

Says Mr Chandu Siroya from Siroya Jewellers: "Since the margin in the gold trade is less than three per cent at the retail prices, the gold jewellers are forced to recover the credit card transaction charges which is actually levied by the credit card companies and not by the retailers themselves."

Similar views are expressed by C.P. Renjith, CEO of the Alukkas group: "We were the first to advertise that customers don't have to pay more if they are buying through credit card." Sometimes some items are priced very low where the profit margin is even less than 3 per cent and then if the consumer decides to pay with a credit card, then there might be an additional surcharge." The profit is in the turnover of the gold not so much in the pricing, he explained. Besides the gold trade is a high risk business because of the volatility of the prices, there are overhead costs, advertisements, etc and other costs that the retailer will want to cover.

Other retailers like Damas and Atlas too claim that they do not make their clientele pay more if the transaction is through credit card, but ultimately it is the pricing of the item that is significant.

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