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Keeping up with expenses and repayments has gotten a lot harder due to the COVID-19 pandemic, as employment disruptions, reduced contracts, and slashed pay continue to leave many under financial duress. Some have even found themselves in the position of being unable to pay their bills at all.
Having credit card debt during times of financial uncertainty can be stressful, but money experts in the UAE say there are measures in place to provide relief to customers who are struggling financially, such as waiving of late-payment fees, deference of interest charges, or extension of payment deadlines.
Sethu Ramaswamy, the regional head of retail products and segments for the Africa and Middle East region at Standard Chartered Bank, said many banks have stepped up to offer additional help to customers during this crisis.
He advises those worried about credit-card bills and debt to communicate their worries to their bank and ask for help rather than “sticking their head in the sand”.
“Banks have announced a moratorium on all products, including credit cards, and those who are impacted by the crisis can approach their bank,” he told Zawya. “Standard Chartered Bank, for example, has a programme to help credit-card clients who are unable to make payments due to the crisis.”
Ramaswamy said there are three initial steps for those who have outstanding debts:
“First, approach your bank for a moratorium or payment holiday. Next, ask the bank to convert the outstanding balance to equal monthly instalments at a lower interest rate at the end of the moratorium. Third, explore opportunities to consolidate debt into lower-rate instalment products.”
Thus, he explained, those with outstanding bills can consolidate debt instead of racking up further fines or inflated charges.
DEFERMENT BUYS TIME
Barney Almazar, a director at the corporate-commercial department of Gulf Law, also stressed that communication with banks is essential.
“The easiest approach is to request for deferment of payment, which some banks have been offering for up to three months,” he said. “If the reason for not being able to pay is termination and you have insurance on your card, coordinate with the insurance company, if you have one, so that they can take care of your minimum monthly payments until you find a new job.”
He added, “The best approach is to convert the credit card balance into a fixed-term loan. In this way, you save on interests, and the liability will be cleared after the agreed period of time, compared to paying the minimum monthly due on your card, which will not really clear the total outstanding loan.”
He cites a client who “had been paying the minimum monthly due of AED 5,000 for her credit card for the last six years and the loan balance has not improved. […] Had she converted the credit-card liability into a fixed-term loan, she would have been debt-free after three years.”
Getting out of debt may mean looking hard at cash coming in and out of the household and planning and budgeting so that you can keep ahead of bills. But for those with outstanding debt who need immediate help, Almazar offers three tips, first and foremost of which is making sure to not incur any further debt to pay back what you owe.
“Forget the idea that you can pay debts with another debt, unless the new debt has lower interest rates and better terms,” he said. “Loan restructuring is not the same as securing loans left and right just to pay what is due.”
He continued: “Second, talk to your bank to demonstrate your good-faith intent to repay. Agree on a payment that you can afford. Third, know the UAE Central Bank rules and regulations and use the law to your advantage. For example, when renegotiating payment, remember that the maximum monthly repayment cannot exceed 50 percent of your salary. Collecting agents will not readily offer you the options available unless you ask for it.”
Almazar said that as long as residents have the good-faith intention to honour their obligations, financial experts can assist in settling an outstanding issue. The important thing to remember is to take action quickly.
(Reporting by Jennifer Bell; Editing by Seban Scaria)
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