Credit Card Interest in UAE vs. UK

Wednesday, April 10, 2013, AM | 7 Comments

The UK’s credit card marketplace is hyper competitive. How competitive is hyper competitive? Well, credit cards in the UK can have 0% balance transfer deals lasting up to an incredible two years. Yes, two years without paying a single penny of interest. Now, how does that stack up with another country? Let’s find out!

  • UAE Credit Card Interest Rates

    The UAE – why choose that country? Well, for starters, it’s one of the richest countries in the world on a per capita basis.

    Therefore, you would expect it to have a fairly competitive market, particularly given their popularity among the growing expat community.

    Credit card interest has been a subject of much media interest in the UAE over the past years, resulting in a cap on interest rates and a fairer and much more competitive marketplace.

    Take HSBC’s credit card collection as an example. They are charging anything from 27% p.a. on purchases, which might sound like a lot compared to the UK, but for the UAE market, this is a marked improvement.

    Note that only a couple of years ago, the average interest rate on purchases was as high as 33.9%. These cards also come with excellent rewards programs, which is often lacking in the UK’s price centric market.

  • UK Credit Card Interest Rates

    The UK has a very, very different marketplace in comparison to the UAE. First and foremost, the UK’s consumer-led market is focussed almost entirely on price.

    And that means low interest rates. If a bank wants to attract new customers, then they simply have to compete on interest rates. This has resulted in ever longer introductory periods and rock-bottom interest rates.

    Currently, there are multiple cards on the market offering balance transfers at 0% for at least 2 years. The competition doesn’t stop there either as banks are offering new customers over 1 year of interest-free purchases.

    And what about the annual fees for these cards, for surely they must be astronomical? Well, not exactly. Most cards in the UK don’t charge a fee. You see, it’s just a very different market that’s saturated and highly competitive.

  • What Can They Learn From Each Other?

    It’s all very well examining the nature of two very different markets, but it would be more useful to draw some conclusions on what one can teach the other.

    The UAE is very much focussed on providing a reward, a reason to own the card. Most cards there, even the ‘lower’ offers, are linked with the bank’s rewards program or an airline’s frequent flyer program.

    So while credit cards in the UAE are more expensive on a like-for-like basis, they are generally much more rewarding. The UK’s banks may have to move in this direction in order to attract new customers as they can stretch the limits of the balance transfer offer only so far.

    And while the UK could do with a few more rewarding credit card offers, the UAE’s cardholders might appreciate some of the UK’s price competitiveness in their native market.

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