How to choose a perfect credit card for your needs in UAE

Keep in mind that no matter how much freedom your credit limit offers, you'll have to pay off your debts sooner or later.

Selecting the credit card that's best for you is both an art and a science. To make sense of all the options and pick the one that suits your pay cheque, lifestyle and aspirations can be a daunting task.

By some estimates, the UAE has well over 200 variations of credit cards, tailored to diverse lifestyles and income brackets. It is, therefore, important to understand that no single credit card is superior to all others or even suitable for everyone.

Depending on whether you use credit cards to tide over a period of financial strain, manage daily finances, maintain cash flow or simply indulge your exquisite tastes, this piece of plastic can either be a great buddy or a debt trap.

With the minimum monthly salary requirement starting as low as Dh5,000, credit cards are now accessible to most of the UAE's residents. Here are some tips on choosing the one that's perfect for your needs while ensuring you get the most out of it.

Perfect match

Whether you're a first-time user or an experienced cardholder, it helps to take stock of your credit card usage from time to time.
Check your spending habits and ask yourself what you want to use your card for - online shopping, paying utility bills, dining, entertainment, or just to spread the cost of a high-ticket purchase.

Many families bank on credit cards to cope with children's school fees, but your vacation patterns could also influence your choice, since many credit cards offer travel benefits.

Affordability

It's also important to take into account whether you plan to pay off what you owe the bank every month or spread repayments over several months. If you are looking to clear the balance in full and on time each month, your bank's profit rates (interest rates in conventional banking) probably will not matter to you. However, if you are unable do so, it would be wise to opt for a card with a lower annual profit rate, especially since the annual profit rate (APR) for some banks can climb to as much as 48 per cent.

As Islamic banks are Shariah-compliant, they don't charge profit over profit. This might be an important factor to consider while choosing your credit card. In addition, you must keep annual fees in mind. Some banks offer free-for-life cards, although annual fees may be mandatory for all co-branded cards.

Always read the fine print before finalising your card of choice. Also, be extra cautious about hidden charges and fees, such as the cash withdrawal charges and daily profit.

Now, on to the more positive aspects of credit cards. Among the many ways credit cards can save you money are zero transaction fees on balance transfers. This scheme allows you to transfer the outstanding balance from your existing card where you are required to pay subsidised profit rates to a new one. If you then clear the debt within a specified time limit (usually ranging between three and 12 months), you avoid profit rates altogether.

Niche benefits

Once you're done with the nitty-gritty, you can turn your attention to the more enjoyable aspects of credit cards - the range of incentives available.

Depending on your preferences, you can choose from a wide variety of benefits including cashback on purchases, movie ticket deals, air miles, discounts on school fees, dining discounts, or reward points redeemable on shopping or dining vouchers or retail merchandise.

Some credit cards come with travel and lifestyle perks, such as airport lounge access, health club memberships and golf privileges.

Complimentary valet parking at malls and cashback on domestic and international spends are also some of the added attractions. According to estimates, a niche travel credit card can save you up to one quarter of your vacation expenses.

Stick to your limits

Before you get carried away, keep in mind that no matter how much freedom your credit limit offers, you'll have to pay off your debts sooner or later. Opt for a card with a sensible limit so that you can manage your expenses and pay them off within a reasonable period.

It's a good idea to use a comparison website to learn about the full spectrum of credit cards out there. In any case, use your credit card wisely. Remember that you alone can determine whether your card becomes your friend or your foe.

The writer is head of assets, retail banking, Noor Bank. Views expressed are his own and do not reflect the newspaper's policy.