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Credit card charges and how to avoid them

Credit cards have a range of fees and charges.

Understanding how the fees are calculated and using your card smartly can help you avoid, or at least reduce, the charges you’ll pay.

Credit card interest and how it works

Credit cards come with a fixed annual percentage rate of interest, and this determines how much you’re charged on any balance you carry each month.

If you completely repay your credit card balance each month, you won’t be charged interest. But if you let it roll over, you’ll be charged a percentage.

Here’s an example of how credit card interest is calculated, based on an interest rate of 41.40%:

  • you have a balance of AED 4,000 that you carry over to the next month
  • 40% of AED 4,000 is AED 1,656
  • this is the annual figure, so, you divide it by twelve to get your charge for the month
  • which means your interest for that month would be AED 138

If you think you’re likely to carry over your balance every month, you might want to prioritise a card with low interest.  

But remember, if you repay your full balance on time every month, you won’t be paying any interest, so a card with a lower, or no annual fee could be cheaper.

Your card’s annual fee

Another key charge to be aware of is the annual fee for your credit card.

Some cards have no annual fee for the first 1 or 2 years, and some have no annual fee at all.

If your card has a low interest rate, but a high annual fee, it may be more expensive overall than a card with a higher rate and no annual fee, especially if you’re clearing your balance every month.

Other credit card fees

Here are some of the key credit card fees you should know about.

Missed or late payment fees

You’ll need to repay at least the minimum amount due on your balance on time each month or you’ll be charged a missed or late payment fee.

This is usually a fixed amount – for HSBC credit cards it’s typically AED 230.

Exceeding your credit limit

Your credit limit is the maximum amount you can spend on your card.

If you go over your limit, you’ll be charged.

It’s usually a fixed fee, and you’ll typically be charged for each billing period in which you’re over your limit until you clear the excess.

Balance transfer fee

If you transfer your balance from an existing credit card to a new one, you could be charged a processing fee. It’s usually calculated as a percentage of the amount you transfer.

You might also have to pay interest on your new balance each month, depending on what type of card you have. Some cards offer 0% interest on balance transfers for an initial period.

Explore: How to make the most of a balance transfer credit card

Cash withdrawal fees

If you withdraw cash using your credit card, you’ll be charged a cash advance or cash withdrawal fee.

For an HSBC credit card, it’s 3% of your withdrawal with a minimum of AED 100.

Using your credit card outside the UAE

You’ll usually need to pay a foreign currency processing fee for using your card outside the UAE.

It’s typically calculated as a percentage of each transaction you make – for HSBC cards it’s a 2% charge.

How can you avoid credit card charges?

While you won’t be able to avoid your credit card’s annual fee if it has one, most of the other charges are avoidable.

Here’s 5 tips on how to avoid charges on your credit card:

  1. Pay off your card monthly

    If possible, pay back your entire credit card balance each month. You can completely avoid paying interest by doing so.

    If you can’t pay it back in full, try and make at least the minimum repayments towards your balance so you’re not charged a missed or late repayment fee.

  2. Set up a Direct Debit
    Setting up a Direct Debit to repay your balance automatically means you have one less thing to remember each month. You can also schedule your Direct Debit for just after you’re paid each month to make sure you’re prioritising your credit card repayments.
  3. Stay within your limits

    Know what your credit limit is, and keep an eye on your balance.

    You should also be aware of your own personal limits in terms of what you’ll realistically be able to repay each month.

    The HSBC UAE mobile banking app allows you to set monthly spending limits on your cards to stop you from going over your budget.

    You can also monitor the balance of your credit card via the app to keep track of your spending more easily.

  4. Make use of 0% interest periods and balance transfers

    If you know you’ll be making a big purchase on your credit card, consider looking for one with a 0% interest period on purchases.

    You can avoid paying interest until the end of your initial term, but make sure you keep up with at least your minimum repayments to avoid fees.

  5. Avoid cash withdrawals

    Withdrawing cash with your credit card can be expensive – they’re not designed to be used like debit cards in that way.

    Some cards do allow you to transfer money to your bank account, but make sure you check the associated costs before doing so.

    Our Cash Instalment Plan, for example, allows some HSBC credit card holders to send money directly to their bank or savings accounts.

    Explore: Cash Instalment Plan

Explore more

Find out more about credit cards and how they work to help you decide if they’re right for you.
Learn more about the different types of credit card to help find the one that’s right for you.
Learn about how to use a balance transfer credit card and what a 0% interest rate means.