RIYADH, 26 April 2007 — A spiral of debts is what is in store for people who fall into the trap of irresistible promotions and offers on credit cards. In a growing fashion across the Kingdom, many low-income people are accumulating enormous debts by using credit cards to live beyond their means, Al-Watan newspaper reports.
“After falling into the trap of taking a credit card, people begin to spiral into a well of accumulated debts. The person then becomes indebted to the bank and is obliged to settle bills within a month. Failure to meet payments results in interest, which continues to build up,” said a credit card sales representative.
“I visit governmental companies and organizations to market credit cards. Eighty percent of those who take credit cards are government employees. They usually take them to find solutions to their financial problems and buy everyday necessities,” he added.
The problem of people being unable to pay back loans is growing to such a degree that many banks are currently discussing plans to establish arrears companies to pursue people who are late in payment and to develop a robust blacklist and credit system similar to those in the West.
“Credit cards are easily available. A person needs to earn just SR2,500 a month to qualify for one. Cards are then handed over at the bank or sent by post,” said the salesman, who wished to remain anonymous.
Government employee Abdul Rahman said a credit card company recently blacklisted him. “I was surprised when I found my name blacklisted. When I asked for the reason, I discovered that the bank employee hadn’t properly explained to me the consequences of not paying on time,” he said.
Abdul Rahman said that his bank would automatically deduct credit card payments on a monthly basis from his salary. “The problem is that the bank operates under the Gregorian date, while government employees get paid according to the Hijri date. This has made me fall behind in paying my debts and accumulating interest,” he said.
Saeed Al-Zahrani, another government employee, said, “I was surprised with the fees that banks charge to issue credit cards. I don’t see any reason for imposing such fees. Banks make enough money as it is.”
Surur Abdullah Al-Ghamdi said, “When I first got my credit card I spent SR5,000. When I went to pay it I learned that I had to pay SR6,000. I’d been charged for each day I was late in making the payment.”
Speaking to members of the public, it does seem that many Saudis know very little about the way credit cards operate. This was also the case with Al-Ghamdi, who said that his bank failed to give him sufficient information.
“The bank didn’t tell me things that I needed to know when I was issued the card. Moreover, the bank employee assured me that the card was an Islamic one and wouldn’t accumulate interest. After using it I realized that this is definitely not the case,” he added.
Most bank representatives that Al-Watan spoke to revealed that people of low-income, who find it difficult to balance their budgets, mainly use credit cards. As a penalty for late payment, banks charge five percent of the total money spent.
Interestingly, bank representatives that Al-Watan spoke to failed to mention the penalties that banks charge customers for going over their credit limits.
Abdullah Al-Mutairy, manager of the Employee Affairs Department at the Health Ministry, said, “People who have credit cards and end up ignoring their conditions are left surprised when money is deducted from their accounts. Many workers complain that the amount almost exceeds their monthly salary especially after including penalties and dues.”
Al-Mutairy further warned people against being lured by advertisements for credit cards. “This will just drown them in a spiral of debits. They need to understand credit card rules and regulations and organize themselves,” he added.
