Credit cards will not solve Covid-19 budget woes

Credit card debt continues to be the most expensive form of unsecured debt in the UAE

Man using credit card for online shopping. Image used for illustrative purpose.

Man using credit card for online shopping. Image used for illustrative purpose.


At a time when money is tight, it is tempting to swipe those plastic cards but, remember, this "easy access" to credit may land you in considerable debt in the near future, experts have warned.

Credit cards, with all its charges and penalties, are not the solution to budget challenges from Covid-19-triggered pay cuts. Whether you have one or 10 in your wallet, the golden rule remains: Swipe wisely.

Credit card debt continues to be the "most expensive" form of unsecured debt in the UAE, and probably the most mishandled one, too, financial experts noted.

Steve Cronin, expat financial coach and founder of, advised residents never to use debt to purchase anything that will be difficult to pay off if they lose their jobs.

"Always pay off your credit card in full every month, as interest rates can be above 40 per cent per year," he reiterated.

"Putting more on a card than you can pay off could lead to a catastrophic debt spiral, as the debt balloons very rapidly. If your debt's interest rate is five per cent or more, you should prioritise paying it off as fast as possible. If it's below four per cent, then make the monthly payments, but there's no need to pay off extra chunks compared to investing the money sensibly instead."

Cronin added that there are "too many people" who have multiple credit cards and personal loans, especially to handle their annual rent payments, job loss, or family issues overseas.

Echoing the sentiment, Ambareen Musa, founder and CEO of, said it is common to hear of borrowers - who have exhausted other forms of credit, such as personal loans - relying on credit cards to meet all sorts of expenses.

According to a UAE-wide survey conducted by over two years ago, 83 per cent of respondents had at least one active debt obligation. These could be personal loans, home loans, car loans, or credit card debts. Alarmingly, 27 per cent of the survey participants said they had three or more active debts.

"If you already have an outstanding debt on your credit cards, make sure you pay off as much as you can, or even just the minimum five per cent balance during the most difficult months. Not meeting this minimum payment requirement can get you penalised heavily," Musa warned.

Instead of swiping away, it is high time residents took a close look at their budget and strip it down to the bare minimum.

"Since debt relief is only temporary, you will have to save up as much as you can, to honour your debt obligations in the future," Musa said.

"If you are forced to tap into your savings and emergency fund to keep up with your debt commitments, make sure you replenish this pool of savings slowly as you go along."


The Central Bank of the UAE has made it clear that it expects banks to treat borrowers fairly and offer individuals affected by the Covid-19 pandemic loan payment holidays, noted financial coach Steve Cronin.

"If you haven't had a pay cut, you may get a one-month holiday. If you can prove that you've received a significant pay cut or job loss, banks will offer you payments of two to six months' holiday, depending on the bank," he said.

Ambareen Musa, founder and CEO of, said borrowers, who have been financially impacted in the wake of the pandemic, have access to a three-month penalty-free payment holiday on loans and credit cards. They are also offered interest-free installment plans of up to six months (in some cases with zero processing fees) on grocery purchases, school fee, and utility bill payments made with credit cards.

"However, one size may not fit all when it comes to standard debt relief measures. Many borrowers may not be able to qualify for such debt relief, especially owing to a poor repayment track record. Therefore, borrowers must reach out to their banks to see what other debt relief or debt restructuring options are available to them," she said.

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