Are you in debt because of this common credit card mistake?
While residents across the UAE are generally careful with their spending and happy about their overall current financial situation, several have admitted that they are currently in debt with no idea about their total debt.
Data collected online by YouGov Omnibus among 1,098 respondents in the UAE showed that debt is common among UAE residents, with more than three in five respondents currently having debt of some kind, most commonly from credit cards (33 per cent) and personal loans (28 per cent).
The high percentage of personal debts could be a direct result of inadequate financial knowledge, with 29 per cent of respondents indicating they do not feel well-informed about borrowing for credit cards or loans. The data also showed that close to one in three were unaware of their total debt and further to that, 39 per cent do not see their total debt reducing despite making regular payments.
When looking at the habits of those with current outstanding debt, around two in five displayed what could be deemed as risky behaviour. The most damaging would potentially be those using credit cards to pay for things they can't currently afford at 43 per cent, not saving any money due to debt at 40 per cent, and inability to make debt repayments on time at 36 per cent.
"Although most UAE residents seem to be managing their personal finance fairly well, debt seems to be a significant issue for them. In this cashless age, credit cards seem to be a blessing to push through the unexpected/unplanned drain of purchases. However, if not managed well, credit cards can become a burden instead of convenience. A third of UAE's debt is from credit cards," said Kerry McLaren, head of YouGov Omnibus.
"What is more alarming is that more than a third of debt-ridden people are oblivious to the interest rates on debts and even more worrying, a slightly lower percentage is unaware of their level of debt overall. This is an indicator of low financial literacy and awareness. Although people need to take more time to understand the factors that come with borrowing, it also sits with the responsibility of banks who could do more to ensure their customers are financially literate," McLaren added.
When looking at overall monetary well-being, more than half of the surveyed respondents across the UAE were happy with their current financial situation, with around one in three claiming to always feel in control of their finances. The majority seems to have adopted healthy financial practices, including timely payment of bills, upfront payment or reduced payment periods, having a plan for future financial challenges and avoiding using credit cards out of necessity. This suggests a really healthy approach in the region to future spending and saving.
Although this creates quite a positive picture, there are still underlying financial worries for a considerable portion of residents, with 35 per cent of respondents continually worrying about their finances and 47 per cent feeling troubled about losing their job or facing a large pay cut.
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