Almost six out of every ten parents in the United Arab Emirates prefer to pay for the tuition of their children via credit card, but they could end up buried under a lot of debt, according to an expert.
Parents who are unable to repay their credit card bill for tuition fees by the end of the month risk having high interest added on top of the money they already owe.
The majority of credit cards in the UAE charge interest of around 3% per month, and with an annual fee on top of that, parents could be faced with paying 36% more than the original cost of the school fees.
The director of client services at Dubai-based wealth management firm Global Eye, Gemma Frankland, says that cardholders need to keep on top of their spending and pay credit card bills in full and on time every month.
Many families see paying school fees with a credit card as their only realistic option, but it is crucial to pay the money back as quickly as possible.
In the event that the payback timeframe (including fee and interest) is going to be more than a year, parents should avoid the method or they could end up still paying one year’s school fees when it is time for the next year’s, Frankland warns.
Plastic as a form of payment is being increasingly taken up by UAE parents and the option is offered by most of the schools in the country.
Credit card payments have a lot to offer above and beyond just convenience, including the likes of cashback, easy interest free payment plans and air miles.
UAE education provider Taaleem says that credit cards are used for paying large tuition fees by six in 10 (58%) of the country’s parents.
Organisations are also starting to move away from handling physical cash, which is also an inconvenience for parents who have to withdraw a large amount of physical money and then queue in order to pay manually.
It is just simpler for them to pay by credit card, says Taaleem’s marketing and admissions officer Gavin Wright.
Many different deals are also offered by individual banks that enable parents to get a discount if they use a credit card to pay school fees.
First Abu Dhabi Bank and the biggest education provider in the UAE, Gems Education, are offering the Gems Fab Titanium Credit Card for exclusive use with Gems schools.
The card provides a fixed discount of 4.25% when fees are paid in advance, with an option for a 12-month payment plan as well as extras such as education protection cover, free movie tickets and a money transfer facility for extra parental appeal.
However, Franklin cautions parents against signing up based on benefits, and says that an array of payment options should be offered by schools, including direct payment plans.
Parents should also avoid making late payments and ensure that any cards they do use have the most competitive interest rates.