High credit card debt is not uncommon in the UAE. It starts small, with a tiny luxury here and a setback there. Before you know it, you find yourself facing a mountain of bills that only seems to get bigger, particularly if you’re among the significant percentage of residents who only make the minimum payment each month. But with a little discipline, conquering credit card debt in the UAE is both possible and straightforward.
However, there are several ways to take charge of your finances and pay down any accumulated debt. The following step-by-step approach can help you get started.
First, review your debts
Strange as it sounds, not everybody knows just how much they owe. Since an outstanding balance on your credit card can accrue interest every month, a small debt can grow significantly over time.
The first step, then, is to sit down and calculate how much you owe, across all your cards – whether in the UAE or in your home country. Use the exercise to track your spending patterns, so you know where your biggest expenses are. Also take a closer look at your statements – are there any payments you haven’t made? Bank fraud is something you should look out for.
Then, create a personal balance sheet
It’s hard to make a start on managing your debts without a clear picture of your finances. Drawing up a personal balance sheet can help. Don’t be fazed by the fancy term – it’s simply a budget spreadsheet that tracks your income and expenses at a glance.
You can create an Excel sheet or use any of the many personal finance apps. Look back over the past three months to see where the money’s coming from, and where it’s going. Next to each expense, put a small N (for need) or W (for want) – that will help you keep essentials such as rent and groceries separate from luxuries such as new clothes or furniture. Experts typically suggest that no more than 50% of your income should go towards essentials. If your outgoings exceed that amount, it’s worth taking a look at how you’re classifying things. Did you mark those new work clothes as a necessity? If there’s a debt to be paid, you may need to think again.
Once you’ve done the math, you’ll have a clearer idea of how much money is available each month to pay down your credit cards. From here, your personal situation dictates your options.
Pay more than the minimum amount
Financial experts advise paying off your credit card bills in full each month. If you’ve accumulated a large debt, this probably won’t work right now, but you should at least attempt to pay down as much as you can afford. The benefit is immediate – you’ll have a smaller amount of interest to pay the following month. This strategy is best suited to those who only owe money on one credit card.