possible reasons why your credit card application has been rejected

Top 3 possible reasons why your credit card application has been rejected

 

Credit cards are popular and convenient payment tools. It is a well-known fact that banks offer several attractive features on their best credit cards such as Cinema offers, Airport lounge access, Valet service, Golf offers and many more.

Banks are constantly looking to acquire customers who have a good track record of payments and credit history. In a country like UAE,  where in 80% of the bankable population is made up of expats, it is important that banks do their due diligence prior to approving any credit facility such as credit cards or personal loans. 

Banks have different under writing policies which decides the fate of one’s application? Now, Let me try and simplify the top three reasons why credit card applications get rejected. 

1. Income Criteria Not Met

This is generally the first eligibility criteria that is checked. It is important to note that UAE’s central bank circular 28/2010 “Regulations for Classification of Loans and their Provisions” dictates that banks must ensure that personal loans must be given to people who earn a minimum of AED 60,000 annual income. Note, credit cards in UAE are considered as a form of personal loans and hence this applies to both credit cards and personal loans.

While the interpretation of this regulation might differ bank to bank from an implementation perspective, this criterion ensures that banks do not lend to those who earn less than AED 5000 per month considering living expenses, affordability etc.,

Over the last couple of years, banks have built a system to verify income information from each other in an automated way. This is done by reading Salary credits from your bank statements through a central system. This has relaxed banks policies on documentation requirement in the recent years. 

So, in short it is important to know that one must be earning a minimum income of AED 5000 per month to avail a credit cards or personal loans in UAE

Banks also offer cards for customers based on their income . For e.g., a Prime Infinite Credit Card from Dubai Islamic Bank is offered to a customer who has a minimum income of AED 50,000 per month.

2. Weak or Poor Credit History 

In UAE, Al Etihad Credit Bureau receives financial information from all providers and provides credit reports to residents and financial institutions. The report contains records of an individual’s liabilities such as credit cards, loans etc., Banks evaluate the credit report for repayment history prior to approving applications.  It is imperative that one maintains a clean credit history in order to avail any loan/credit card facility in UAE. Level of debt, payment history, credit history age has an impact on your credit score.

Below needs to be taken care to ensure a clean history.

  • Always pay dues on time.
  • On cards better to pay the entire outstanding. If not, minimum due to be met. Note, full payments may result in a higher credit score.
  • Avoid going over limit on your cards.
  • It may take more than 5 years for a credit record to be cleared hence utmost care to be taken to ensure all the above points.
  • One can avail their credit report online from AECB for a fee. Visit the Al Etihad Credit Bureau (AECB) for more information. 

3.Debt Burden Exceeded 

In UAE, banks have been regulated to ensure that financial liabilities of an individual do not exceed 50% of the monthly income. While Banks follow different processes to ascertain debt burden the general logic is explained below for simple understanding

Monthly Income: AED 10,000

Monthly financial payments (Credit card minimum dues, Loan EMIs): AED3000

Debt burden:30%

Ensure all unused credit cards are closed. Receive and maintain closure or clearance certificates from respective banks for documentation purposes. Consolidate debt as a loan so that the instalment is affordable and within the debt burden. Stay financially fit!

Takeaway

While the above 3 are the top reasons for rejections. There are 90% chances one can get their card or loan approved if the above 3 conditions are met.  Roughly 10% of applications stay rejected for reasons such as verifications and other policies.

Picking the perfect credit cards in UAE for your specific needs should always be based on how you plan to spend and what your current lifestyle is like. Traditionally one signs up for a card based on sales pitch by a bank’s sales executive.  Take advantage of Soulwallet’s credit card comparison platform to make sure you make an informed decision. 

 

Credit Cards in UAE

 

Around 71 percent of affluent residents in the United Arab Emirates own more than one credit card as per the statement of a weekly report. The majority of the residents access credit cards while 64 percent of the public use them for a day- to -day purchases. Another 63 percent admitted using credit cards when traveling abroad.

When you pay with a credit card, you are effectively borrowing money from your bank or lender. Every month you receive a statement that lists all the transactions you have made, along with place, price and sometimes even details of the item.

When it comes to credit card balance transfers and savings in Dubai, it is always advisable to pay the full outstanding on your credit card each month to avoid unnecessary fees. Most banks offer a minimum promotion rate of 2.5 percent and up to 10 percent cash back on spends. The minimum salary requirement to apply for credit cards in the UAE is 5000 AED as per the rules and specification of the banks which may vary with higher or lesser salary rates depending on the lender. The facility of balance transfer is freely available for the first 6 months with a minimum of 2 percent processing fee. Banks offer foreign currency rates with a minimum of 2 percent based on the expenditure or purchases made. If you are a frequent traveller, you might want to make sure you apply for credit cards offering lower foreign currency rates. The annual fee on a credit card will be applicable on a yearly basis as a part of your statement. Some UAE banks advertise and state that they do not charge annually, but it is preferable to opt to pay the annual fees as it has many benefits to offer.

The Soul Wallet Savings Simulator is a financial tool developed to help customers understand which credit cards offer them the best opportunity to maximize their savings. This is done based on an analysis of the customer’s unique expenditure pattern both across the type of monthly and annual expenditure and also the amount spent on each category. The unique algorithms help you ascertain which credit cards offer you the maximum savings potential for your specific spend. This varies from individual to individual.

A frequent traveler will probably consider taking a credit card that offers air miles. However, if you don’t travel a lot but like to save on your transactions, you might prefer a credit card that gives you cash back. Also, cash back amounts could vary based on the total amount you spend in a month. Visa International, MasterCard and the different banks in the UAE offer additional benefits on premium cards, such as access to airport lounges globally, discounts on dining, valet parking, free golf, cinema discounts and other transport facility benefits. You can compare all the benefits on Classic, Silver, Gold, Platinum, Titanium, Infinite and World credit card benefits or choose to search for premium cards directly. Premium cards generally require a higher income or have a higher annual fee.