Credit Cards

How too many credit cards can land you in hot water

Credit Cards UAE

It’s pretty fashionable in the UAE to be in possession of a large number of credit cards, and while many people keep on top of the repayments associated with these cards, simply having that many can land you in hot water. Here’s a story, crafted from real-world experiences I have heard about while working at Al Etihad Credit Bureau, that will explain why having too many credit cards can be a problem.

Mo is a cool guy. He is a professional business development manager living in the upscale Marina development in Dubai. Mo makes a good salary, and he loves cars, so he changes his car often. Right now, he drives a Porsche Cayenne Turbo. He is single, likes to party and go out, and eats out with friends almost every night.

Mo’s apartment is super cool as well. A fantastic balcony overlooks the Marina, it has great parking, and it is close to the tram station. There is only one problem – the rent. Not only is the amount quite high, the property owner demands one cheque, no delays, and no excuses. Mo does not want to leave the apartment, so every year he takes a personal loan to cover the rent payment and pays it off over six to eight months. It is annoying, but Mo is used to it.

This year, Mo was extremely busy at work and in and out of the UAE for several weeks. When he returned, he realised he had only a couple of weeks left in which to organise the funds for the rental. He called up his salary transfer bank and asked for a loan application to be sent to him. By the time he got the application, filled it out, attached the required documents and sent it back, a week had passed. He was not worried, though, because it had never taken more than a couple of days for the funds to reach his account.

In the meantime, he had a meeting with the property owner to sign the renewal, and was shocked to find that the rent had gone up 5%. Well, it was too late to argue (or to find another place) so Mo swallowed his chagrin and handed over a cheque for the full amount. Although it was higher than planned, he could cover it by dipping slightly in to the overdraft facility available through his account. However, for the first time, Mo experienced a feeling of unease. What if there was a delay in processing the loan? What if (sharp intake of breath here) the rent cheque bounced? That would not be good!

Mo called up the loan officer at the bank, and this is where his doubts began to blossom in to full-blown panic. The loan officer did not pick up the phone. That is never a good sign, especially in Dubai. He drove directly to the branch, and insisted on meeting the loan officer. When the officer arrived, he wore a sombre expression. Placing the file on the table in front of him, he told Mo that his loan application had been declined because he was exceeding the debt-burden ratio (DBR) limit of 50% mandated by the Central Bank.

He showed Mo a copy of the credit report that the bank had pulled to see Mo’s credit history. In it were the details of all of Mo’s liabilities – his car payments, overdraft facilities, and most importantly, his credit cards. There were seven cards listed there, with a total credit limit of over AED 1 million. Because 5% of the limit of those cards was being added to his monthly installments, he was way over the DBR limit set by the Central Bank. Mo was already in shock, but when he was told that, until he did something about these cards, there was no way his loan would be approved, he thought he would throw up right there in the bank.

His head spinning, he made his way back to the car, and looked up the address for the Dubai office of Al Etihad Credit Bureau. He needed to get his credit report! He didn’t even have seven credit cards! Angry, upset, emotional, and yes, a little bit afraid, he made his way to the bureau and, 15 minutes later, was looking at his credit report.

The report showed that he had seven active cards, but after checking his wallet, he knew the number was (only!) five. Two of the cards were cancelled years ago! While still in the offices of the bureau, he started making calls. The first bank took 15 minutes to check and confirm that he had no credit card open with them. The second took longer. Ultimately, both agreed that they could issue no liability letters, but it would take two to three days, and he would need to pay a couple of hundred dirhams for them. Mo agreed – he had no choice but to beg them to expedite the letters. They politely agreed to try, but made no promises.

As Mo paced nervously in the lobby of the bureau offices, the pit in his stomach growled insistently. Was this going to be enough? He checked his report again, and called up the three banks from which he had credit cards with the highest credit limits. To each in turn, he requested a reduction in the limit – sometimes 50%, sometimes more or less. In each case, he had to answer questions and explain his decision-making process, trying to keep the stress out of his voice. By the time the bureau closed for the day, all three had effectively reduced the limits, and promised to update the Credit Bureau files “as soon as possible”. He had done all that he could for today, and had missed an entire day of work as a result. He headed back to the office to try to catch up, but was distracted and jumpy the entire evening.

He did not go out that evening.

The next morning, Mo woke early and started calling the banks, one after the other. No joy on the letters of no liability, or a confirmation on updates being sent to the bureau. He called the bureau, but was told that they are unable to make changes to bank data. Mo already knew this from his visit yesterday, but at this point, desperation had taken over. It was Thursday – his cheque would be presented on Saturday. He was out of time.

He called the landlord and hesitantly explained the situation. The landlord was polite but firm. The cheque would be presented to the bank on Saturday. If it bounced, so be it. After that, he would initiate legal action against Mo. Mo’s head was whirling and he found himself unable to speak properly. The landlord, sensing his genuine distress, relented. He came up with another option. If Mo paid him two months rent right now, in lieu of notice, and vacated the apartment immediately, he would not present the cheque on Saturday. Almost sobbing in relief, Mo agreed and said he would bring the cash to him first thing in the morning on Saturday.

The next day, Friday, was spent in a panic. He had to organise packers who could also store his household goods on a monthly basis (and would accept credit cards). He had to find a place to stay, and finally managed to crash with a friend in Ajman whose family was away. And he had to clear out of the apartment, which he managed to do at 4am, exhausted and barely able to walk.

The next morning found him back at the bank, and he dug deep in to his overdraft facility to find the cash for two months rent. Meeting the landlord, and collecting his cheque and receipt, was a relief beyond words. He knew how close he had come to having a bounced cheque on his credit report, and a possible police case with corresponding exit ban at the airport against him.

It took Mo the best part of six months to update his credit card information with the Credit Bureau, pay off his credit cards and overdraft facility, and restore his credit to its former glory. Six long months to appreciate the importance of proactively managing your credit situation. Six months to restore sanity to a life that went off the rails for no major reason at all. He was lucky, and he knew it.

Don’t be like Mo.

Pull your Credit Report from Al Etihad Credit Bureau today, and take control of your life.

Because knowledge really is power.

While Omar works for Al Etihad Credit Bureau, the views mentioned above are entirely his own and do not reflect the views of the Bureau in any way, shape or form. Likewise, Omar’s views do not represent the views of or its owners.

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