I have a credit card with a local bank and have been prompt in making payments every month. I always ensure I pay the full amount so I don't incur any fines or interest.
Recently, I analysed my statements and realised I had not paid a few fils every month of the outstanding dues.
For instance, if my credit card bill was Dh20,540.90, I forgot to pay the 90 fils. I continued making such payments erroneously for months, forgetting to pay the miniscule amounts.
The bank charged me hefty fines and interest. On occasion, the penalties amounted to Dh500. Cumulatively, I am now required to pay about Dh3,000 in penalties because of the compounding interest.
I refuse to make this payment since I have been a diligent customer. The bank refused to cancel this amount, despite negotiations.
I am worried this will affect my credit score. Can you suggest my next course of action? SS, Dubai
Debt panellist 1: Steve Cronin, founder of DeadSimpleSaving.com
This is what I call an "edge case", where a tiny mistake causes big problems and the bank may not even have clear guidelines to deal with such a situation.
You say you have paid the full amount due, but you have not. If the bank has a million credit card customers and each fails to pay 90 fils, the bank receives Dh900,000 less each month.
It is not clear why the bank has charged you hefty fines, as you say you paid a few fils (cents/pence) less than the full amount due on your card for the month.
If it was a few fils less than your minimum payment, I could see why a fine would be charged because you would have failed to make the minimum payment. You would be clearly in the wrong and just have to pay up.
But, as you describe it, you should only be charged interest on 90 fils each month. There is no way this could snowball into Dh3,000.
Banks are usually happy for you to pay off something between the minimum payment and the card balance as they can earn interest. As long as you don’t exceed your card limit, they would not charge fines.
If you have paid off more than the minimum and not hit the card balance limit, you do have a case for making a "reasonable" mistake, which the bank would waive if they wanted to keep you as a customer.
Try speaking to someone more senior in the bank: either go into headquarters or ask to speak to a supervisor on the phone. Keep a record of all the interactions and, most importantly, read through all the terms and conditions of your credit card. Tell the bank you will report them to the Central Bank of the UAE.
If the bank refuses to help you 30 days after complaining, you could contact the central bank’s Consumer Protection Department via their website or 800 CBUAE. I can’t promise they will support you though, as they may find you were in the wrong.
Make sure you have a bank account with another bank, so you don’t lose access to banking services if your relationship with this bank deteriorates further.
Debt panellist 2: R Sivaram, executive vice president and head of retail banking products at Emirates NBD
I am sorry to hear of your predicament — it is frustrating to realise that charges were accruing on your card for miniscule amounts you missed paying.
Quite often, people have small, unknown defaults and payments piling up on their credit cards that go unnoticed.
The compounding effect of unpaid balances plus fees, interest and penalties results in the amount due to grow very quickly and can have an adverse impact on your Al Etihad Credit Bureau credit report.
As you would appreciate, on credit cards, you are expected to pay your dues in full by the due date without leaving any outstanding amount, even if it’s only a small amount. In the event you do not pay the full amount, interest and other charges will start getting applied.
You should review your monthly statements as and when you receive them to understand any charges that may have accumulated and try to have them resolved at the earliest.
Given your situation, especially since you have missed paying only by a few fils, I would recommend setting up an in-person meeting with a senior officer at the bank and explain your situation to them.
If you are an existing customer, you can request them to waive the charges that have accumulated so far. Keep communicating with the bank. Keep a record of all your correspondence to date and going forward.
If the bank does not agree to waive the charges and you wish to improve your credit score, the best course of action would be to clear the Dh3,000 outstanding as soon as possible.
Debt panellist 3: Carol Glynn, founder of Conscious Finance Coaching
As you are paying the full balance due each month, short only by less than one dirham, it is very surprising to hear your penalties and compound interest is so high.
If you have not done so already, I suggest you check your payments departed your bank account every month and were recorded on your credit card statement on the days you made the payment.
Create a document detailing all your payments to your credit card. This will be helpful when challenging this with the bank. It would be useful to list the amount due as per your credit card statement and cross-reference it to the transaction by which you paid that amount due, along with all relevant dates.
Could it be that you missed the deadline to pay your credit card bill each month? Even if you pay in full, if you miss the date by which it is due, the bank may charge you a late payment fine. Could this be what happened in your case?
It is important to reconcile the dates as the bank cannot charge you fines if you are paying the minimum amount due on time.
Regarding interest being charged to you, this would only be on the unpaid balance. If you make full payment, leaving only a small amount of less than one dirham, then the interest would be only a few fils each month. Could it be you were charged interest on the late payment fines?
I would suggest visiting a branch and asking to speak to a senior representative to discuss. Take along all your documentation to show your timely payments and request they explain to you how the penalties and interest are calculated and applied.
This needs to align with the terms and conditions of your credit card. Ask them to point you to where in the T&Cs it explains this kind of penalty and interest rates.
If you did pay on time, you would have a case to challenge the late payment penalties. Raise a formal complaint via the bank's complaints department. They will have 30 days to provide a satisfactory resolution, after which if you are not happy with their response, you can raise a complaint with the Central Bank of the UAE.
If you missed your deadline each month for minimum payments, it is up to the discretion of the bank on whether they will waive the penalties or impose them. Speaking to someone within a branch environment is your best first step to negotiate this.
You can check your credit score by applying for your credit report on the Al Etihad Credit Bureau website. I would suggest investing in obtaining this report so you can assess the impact on your credit score and take the relevant steps to correct or improve it.
The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to pf@thenational.ae
