All of us have one or more bank accounts, use debit cards or credit cards and may have a loan or plan on taking one in the future. Bank fees and charges may seem very small when seen individually, but can cost you quite a bit when consolidated. Apart from the standard charges and interest costs that we have to bear when using these banking services, there are many other types of fees that can be avoided to a great extent. And here’s how you can sidestep these.
Account balance dipping below the minimum requirement
If the balance in your current or savings account falls below the minimum average monthly balance requirement, most banks in the UAE would charge you about AED 25 per month. But you can easily avoid this fee if you stay abreast of your account activity and keep yourself updated through regular e-statements or the online banking portal.
ATM usage fees on other banks’ ATM’s or international locations
Most banks charge a standard fee when you use ATM’s owned by other banks or those outside of the UAE. While this is common practice in the banking industry across the world, the extent of fees charged differs from one country to another. Here is what UAE banks will charge you:
- AED 2 on cash withdrawal and AED 1 on balance inquiry when you use other banks’ ATM’s within the UAE
- AED 6 on cash withdrawal and AED 3 on balance inquiry when you use other banks’ ATM’s in other GCC countries
- AED 20 on cash withdrawal when you use any other international ATM, along with a 2% processing fee
Failure of standing instruction due to insufficient funds
A standing instruction or standing order is a standard feature offered by banks, which you can use for paying a fixed amount towards bills, loan installments at other banks, rent etc. at regular intervals. Setting up a standing instruction will cost you around AED 50 at most banks in the UAE.
However you should be careful that on the date when the standing instruction transaction is due, it does not get declined due to a lack of funds in your account. In this case you will be charged about AED 25 per failed transaction.
[Related: UAE bank account charges – maximum fees]
Don’t delay your loan installments
Banks can charge anywhere from AED 50-200 in late payment fee on a personal/auto loan and an even higher AED 500-1,000 on home loans. Besides this banks may also charge a penal interest rate on top of the regular interest rate, on the delayed installment amount.
But the fee is not all that a delayed installment will cost you. It may affect your credit report, and can raise a red flag in an otherwise impeccable credit history. And this could hamper your chances of getting a loan at a competitive rate in the future.
Discounts on processing fee?
Banks charge a processing or arrangement fee when you apply for a loan. The arrangement fee is usually 1% of the loan amount and ranges from AED 500-2,500 for personal/car loans and usually starts at a minimum of AED 3,000-5,000 with no upper limit for home loans. As a potential borrower, you should look out for discounts on processing fee that banks may offer when promoting a loan product. You can also check with your bank for a processing fee discount if you’re enrolled in a premier banking program.
[Related: Topping-up your loan? Beware the fees]
Avoid the hefty charges on cash withdrawal
It isn’t a good idea to use your credit card to withdraw cash, unless it’s the last resort. Most credit card providers levy a cash advance fee of about 3% on the amount withdrawn. Also, there is no interest-free period on cash withdrawal and interest will start accruing from the date of the transaction, and can even be higher than the standard interest rate on your card.
Also, some credit cards have an additional feature of purchase protection, wherein most purchases made with your card are covered against the risk of theft or damage for a limited period. So it makes sense to use the credit card for such purchases, rather than withdrawing cash to do so.
Know how much foreign exchange fees can cost you
Foreign exchange fees on credit cards can range from 1% to 3% of the transaction amount. Apart from the fees charged by your bank, there will also be a conversion fee charged by Visa or MasterCard. If you intend to use your card abroad or are a frequent traveler, make sure to check the fees beforehand. You can also explore other alternatives like converting currency before you leave or getting a prepaid forex card.