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Moving to Dubai? Five things you need to know about banking

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An easy guide for expats in Dubai to manage their finances

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August 29, 2013 2:19 by



Moving to Dubai is an exciting adventure, but expatriates often find understanding the banking system and navigating their finances tricky, which can even lead to money problems. Going blind into banking in Dubai simply isn’t an option.

So where do you start?

To open a basic bank account, you will need your residency visa set up first, which generally takes a few weeks once you are in the country. Make sure you bring some cash or still have access to your international account for the first month or so. However, there are some exceptions to the rule.

Some international companies have deals with specific banks, so contact Human Resources to see if you can open an account prior to moving to Dubai. Otherwise, once you are here, they can give you a letter that will allow you to open the account without your final residency visa.

There are some global banks that – provided you are a premium customer – would allow you to open international accounts before moving to Dubai, such as HSBC Premier. You can also get loans at cheaper rates in the UAE if you already have your salary transferred to the bank you are taking the loan from.

Which banks are present in the UAE?

There are 50 banks in the UAE offering more than 750 different banking products including: 206 credit cards (both Islamic and conventional), 77 personal loans, 59 car loans, 50 mortgages and 259 bank accounts.

As you can see, there are many options to choose from and the differences can be quite confusing. However, you can visit Souqalmal.com to search and compare all the banking products in the UAE, which will help you to research everything on offer.

But before you take on the first attractive account or credit card that comes your way, here are five things you need to know about managing your finances in the UAE.

1. The difference between Islamic and conventional banking

Because the UAE is a Muslim nation, there are both Islamic and conventional banking institutions available here. For those familiar with conventional banking systems, it is important to understand that the foundation of an Islamic bank is the Islamic faith and must therefore stay within the limits of Sharia law.

The main principles governing this are the absence of interest-based transactions, the avoidance of any economic activities that might involve oppression or speculation and the discouragement of production of any goods or services that might contradict the religion.

While both systems offer the same financial products to customers, how they profit from that relationship differs. In Islamic banking, all forms of interest are forbidden. Instead, the bank and the consumer divide the profits between them; hence, why an Islamic bank will talk about profit rates rather than interest rates.

Both Islamic and conventional banking are open to expatriates and offer competitive financial products, so comparing the options could change your mind about where you want to deposit your income every month and where you want to take a credit card from.

2. Credit card rates are high

There are over 195 different credit cards on offer in the UAE and in 2012 there were four million cards in use. However, for those who run up debt on their card and only pay off the minimum balance, it can be a costly affair. The average credit card rate in the UAE currently sits around 30 to 35 per cent.  Compared to the United States and the United Kingdom, where the average rate sits around 15 per cent, the expense is clear to see.

Consequently, if you don’t pay off your credit card every month, you will be paying sky-high interest rates here and it will take longer to pay off the debt than it might do elsewhere.

3. Central Bank regulations are there to protect you

The Central Bank has a number of measures in place to try to protect consumers from unscrupulous lenders. In the boom days of the mid 2000s, it was relatively easy to borrow money, with many taking on loan amounts that were totally unworkable with their salaries. As a result, many got into serious financial trouble and some ended up fleeing the country or being sent to jail for unpaid debts.

Since then a number of rules have been introduced. These include limiting car loans to a 20 per cent deposit, a capped charge on minimum bank account balances of AED25 and a fixed charge on early loan repayments of one per cent of the outstanding balance. This is just a sample of the rules in place that govern lending. It’s also worth finding out the maximum amount banks can charge, so you will find accounts and loans without those fees attached to them. So make sure to shop around for the best deals.

4. Buying property is not always straightforward

Owning a house or villa in Dubai is certainly possible for expats. However, there are two things you need to remember.  Firstly, you can’t buy any house you like the look of. Only certain developments are open to expatriates, including those built by big developers such as Nakheel and Emaar.

Secondly, you will probably need a hefty deposit. A new mortgage cap is being introduced, possibly this year, which will see banks being forced to demand bigger deposits to secure a mortgage.

Souqalmal.com gives you the full comparison of down payment on home loans, where there are some available that only require a down payment of 15 or even 10 per cent. However, the proposed cap would see expats required to put down 25 per cent on their first property and 40 per cent on their second.

While it is unclear when, or if, this cap might come in, but if you decide to buy a property before it does, beware of hidden fees. Don’t just go for the lowest rate as that might come with a big early settlement fee such as 5 per cent and transfer fees, which are charged when you switch to another lender.

5. A credit bureau is being set up

While credit bureaus are commonplace in developed economies around the world, until now the concept has not materialised here. However, the UAE is currently testing a federal credit bureau, which will bring in a number of changes to the UAE’s financial sector.

Under the current system banks struggle to know what other loans and credit cards a customer has, however, the Al Etihad Credit Bureau will have access to every consumer’s financial records, allowing banks a much clearer idea of a potential customer’s credit worthiness.

The project is currently in the test phase, but a full rollout of the service is expected next year, with clients able to get hold of a copy of their own credit report. The system will reduce the huge amount of paperwork consumers currently need to take out a loan or credit card. Because the banks will know exactly what your financial behaviour is like, there will be no need for reams of bank statements to prove your payment history.

For the consumer, however, it means they need to behave well financially, ensuring they make repayments on loans or credit cards on time and don’t bounce any cheques. The good news is that the Credit Bureau expects borrowing costs to fall by 30 per cent, which could help reduce those sky-high credit card rates.

By Ambareen Musa, founder of Dubai-based financial comparison portal Souqalmal.com



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