A step-by-step approach to get out of credit card debt

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.

Switch to a balance transfer card

Alternatively, shop around for a credit card with a balance transfer facility. Some banks in the UAE will refinance your outstanding credit card balance at other banks with preferential interest rates to be paid back in easy instalments. There is typically a minimum loan tenor and early settlement fees may apply.

Consider debt consolidation

If you owe money on more than one credit card, consider consolidating all your debts into a single loan. Debt consolidation is a way of combining several loans or liabilities into one by taking out a new loan to pay off the various outstanding amounts. By effectively transferring all your debts to one bank, you can simply make a single monthly payment instead of worrying about several creditors. Such loans are often made at a lower interest rate, which could ease your burden significantly.

Debt consolidation does not only help by making a single payment, it also helps effectively to reduce the APR (Annual Percentage Rate) that you have to pay for.

You have two possibilities here. Ring the bank with which you have a good track record – typically your salary transfer account. Alternatively, discuss debt consolidation with the bank where you have the largest outstanding. Depending on your situation, you may be offered a single finance solution – usually in the form of a personal loan – with fixed EMIs and asked to close all your existing cards. It’s worth remembering that you should only agree on a payment you can afford.

Note that under UAE Central Bank rules, you may not be able to consolidate all your debt if your monthly repayments surpass the Debt Burden Ratio (DBR) guideline of 50 per cent of your income.


**DBR guideline: Deductions from salary or regular income of any borrower, for all types of loans extended by banks must not exceed 50% fifty percent of gross salary, and any regular income from a defined and specific source at any time.

Reduce your credit card usage

As long as there’s an outstanding debt on your credit card, you do not qualify for the 30-day interest-free period on any new purchases. This means that the size of your loan increases each time you tap your card, negating the value of any loyalty points or other rewards. If you must use your card, limit its use to bare essentials, such as groceries, and pay for everything else via direct debits, bank transfers or cash until you pay all of your outstanding debt on your credit card.

Recruit a support buddy

Debt issues can be a constant source of worry that can take their toll on your mental wellbeing. As with other tensions, it helps to be open about your problems. Discussing your finances with a friend or family member can help ease the stress that comes with debt management. Being open about your finances with a close confidante garners emotional support, helps to reduce temptations, and also promotes accountability, helping you stay on track.

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Keith J Fernandez is an editor and communications professional who advises on marketing content strategy. He is based between the UAE, the Netherlands and India and writes about business, technology and personal finance.

This article is intended to provide general information about finance and investments and does not replace or should be taken as professional financial advice. The content reflects the view of the author of the article and does not necessarily reflect the views of Citi or its employees, and we do not guarantee the accuracy or completeness of the information presented in the article except information on Citibank N.A. – UAE products referenced herein.
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