How does your credit card work, month to month?

A credit card lets you spend up to a limit the bank sets, and you repay the bank later. The Central Bank defines it as a card where the bank pays for your purchases and cash withdrawals, and you pay the bank back at the start of the following month, or in instalments if you agree that with the bank.¹

What happens each month on your card?

Your bank sends a statement once a month. It must be free and must list each transaction, all interest, all fees totalled separately, the exchange rate on each foreign currency transaction, your balance and your next payment due date.²

You then have a set number of days to pay:

The figures come from each bank’s key facts statement or price guide.³⁴⁵⁶⁷

When do you pay interest?

Only when you pay less than the full statement balance by the due date, or when you take cash. Central Bank standards say banks must not charge interest on the balance, excluding cash advances, when the new balance on the statement is paid in full by the due date.²

Pay part of it and interest runs at a monthly rate. On the banks above it is 3.25% to 3.99% a month, which their documents show as 39% to 47.88% a year.⁴⁵ Emirates NBD and FAB also say that once you carry a balance, new purchases lose the interest-free period until you clear it.⁴⁵ The detail is in how interest is charged.

What is the minimum payment?

The least you must pay by the due date to avoid a late fee. At most banks it is 5% of the balance or AED 100, whichever is higher; RAKBANK uses 4%.⁴⁷ Paying the minimum stops the late fee. It does not stop interest. See the minimum payment.

What fees can you be charged?

The common ones are an annual fee on some cards, a late payment fee, an over-limit fee, a cash withdrawal fee and a fee on foreign currency spending. The Central Bank caps the late payment fee at AED 230. Banks print it as AED 241.50 including VAT.²⁴ The full list is in credit card fees.

Can the bank raise your limit without asking?

No. The standards say a bank must not automatically increase your credit limit without your expressed consent, and must run a fresh credit bureau check before offering an increase.² It also cannot change your card’s terms or fees without 60 calendar days’ notice.²

Before you apply, check who can get a card and use the interest calculator to see what carrying a balance would cost.

The small print

• The definition of a credit card is in Article (5)(a) of Central Bank Regulation No. 29/2011, effective 23 March 2011.¹
• Statement contents are in Consumer Protection Standards clause 2.1.3.19. The no-interest rule is clause 7.1.5.14. The limit increase rule is clause 7.1.3.5 (e). The 60-day notice is clause 2.1.1.47.²
• The AED 230 cap is item 33 in the Annexure to the Consumer Protection Standards.²