Using debt to payoff debt: an alarming trend in the UAE
- Published on Wednesday, 14 August 2013 09:11
- 2 Comments
Source: Airport WorldThere has been a lot of good news coming out of Dubai this year beginning with the stampede of people rushing to buy yet-to-be-built apartments. The Dubai Financial Market (DFM) is up over 60% year-to-date, real estate transactions are up 63% and rents are rising rapidly (albiet faster than wages). Behind the good news however, there is an alarmning trend in debt…
According to a new survey from compareit4me.com, a UAE-based finance comparison site, the number of people paying off loans with a credit card is on the increase.
While 20 per cent confessed to the risky financial habit, another 45 per cent said their monthly debt repayments were beyond their means.
Tom Davies, the operations Manager at compareit4me.com, says: “We found worrying trends with large portions of the respondents; trends which meant people were accumulating debt quicker than they could afford.”
The poll also revealed almost four in ten have three or more credit cards and over half of those with three cards or more have already used up over 90 per cent of their available credit.
Even more of a concern is that 42 per cent of those polled only make the minimum payment on their credit card each month.
With UAE credit card rates among the highest in the world, it is wise to think very carefully before signing up for a credit card. If you can afford to pay it off each month and take advantage of any benefits on offer, then great.
However, if you can’t afford the repayments, get your spending in order now. If you don’t, you risk falling into a never-ending debt cycle. It’s a dangerous road to travel down and one that invariably ends in financial disaster.
Click here to link to the original post from The National.
We reported earlier this year on the rising trend among banks to be more aggressive at giving out credit cards and personal loans. This has paid off for the banks, but this is only a short term payoff. Any hiccup in the economy and non-performing loans will skyrocket. When this happens, banks will be shocked and wonder how this could happen.