A credit card is essentially a short-term loan that usually also offers extra benefits, with one particularly notable advantage being bill payment.
The great majority of financial institutions in the United Arab Emirates offer a grace period of up to as many as 15 days in which people can pay their credit card bills, and cardholders have the option of paying a minimum of 5% of what they owe.
This facility for minimum bill payment, as well as the grace period, can both be as much of a disadvantage as an advantage.
Every 30 days, credit card holders in the UAE will receive an account statement, with the due date usually being on the statement.
Most people do pay their bills well within the allotted time, while some prefer to wait right until the deadline is upon them.
However, some people do not know when the best time is to pay back their credit card debt.
A credit card bill can be paid in full or partially even before you receive an account statement.
If the bill has been partially cleared, then the account statement will record the updated balance together with the amount that has been paid off on the month in question.
If a credit card bill is cleared prior to the billing cycle, this will have a positive impact on your credit report.
On the other hand, having a high credit card balance during the billing cycle is seen as an indication of having a high credit utilisation, which can have a negative affect on your credit report.
After sending off the credit card account statement, the cardholder then has a certain grace period in which to pay the bill.
Although there are no late charges on any bills paid within the grace period, bills that are not paid until after the statement has been sent will still impact on your credit report.
Your credit report displays your utilisation of your credit card and is something that will be checked by banks in the UAE before they approve any application you may have made for a loan or a new credit card.
It is not advised to wait to pay a credit card bill until after the due date has passed.
Banks in the UAE charge fees for late payments in addition to the standard interest rate.
Late payment fees are usually between 1% and 2% of the outstanding amount remaining on your credit card bill, with the interest rate starting out at as much as 1.95%, though both the interest rate and late payment fees will vary between different banks in the UAE.
Paying your credit card bill ahead of the due date will not only avoid you being charged any additional fees but will also have a positive effect on your overall credit score.
In order to ensure that low credit utilisation will be displayed on your credit card account statement, pay your bill as early as you can.
