Save by paying on time

We have all missed a bill payment or a renewal date from time to time. So what does putting things off really cost you, and how much can you save if you make every payment by its due date?

• Penalties for paying credit card bills late
• Penalties for delaying loan repayments
• What happens when I miss a mobile bill or utility bill payment?
• Salik violations and fines
• Why you should not delay renewing your car registration or driving license
• Why you should not delay renewing your residence visa or Emirates ID

Credit card bills 

Owning a credit card makes life very easy. It gives the card holder the convenience of spending now but paying back at a later date, after the interest free ‘grace’ period offered by the bank is over (grace period typically ranges from between 45 days to 55 days depending on the bank).

Credit card providers require you to pay a minimum of five percent of your outstanding balance every month. Your credit card statement mentions the minimum amount payable and the due date. But forget to pay on time and you are levied with late payment charges, in your next month’s bill. Some of the late payment fees are:

Qutaiba, a Dubai resident shares his experience, “The first time I got a credit card, I was charged with late payment fees for two months. I hadn’t paid the credit card bill because I thought the amount would be directly debited from my account with the bank.”

Paying your credit card bills on time can definitely save you a notable amount over the long run, not to mention it keeps your credit report sparkly.

Another way you can save is by paying off the full outstanding amount on your credit card every month. This is because when you pay only the five percent that is due, you are charged a monthly interest rate (minimum between 0.83 to 1.5 percent to a maximum of 3.33 percent) on the unpaid balance. The combined interest over many months can work out to be a huge figure!

To take an example: Let’s assume you spend AED 5,000 with your credit card every month and the interest rate charged is 1.5%. Here’s what your expenses on interest alone will look like if you pay only the minimum amount due on your credit card for six months.

In the above illustration: when you spent AED 5,000 in the first month – there was no minimum amount due or interest accrued in that month- since you get a grace period with credit cards.

In Month 2, you pay back to the bank five percent of Month 1’s amount (AED 250). You will accrue AED 71.3 as interest on the balance amount (AED 4,750) – but this will be added to your total outstanding in Month 3. Also in Month 2, you spent an additional AED 5,000 on your card. 

In Month 3 , the total outstanding balance is calculated by adding your spend in Month 2 (AED 5,000) to your carried forward balance from Month 1 (AED 4,750) and the interest (AED 71.3) on that.

[Compare credit cards in the UAE]

Loan installments

If you’ve taken out a personal loan, car loan or home loan – ensure that your repayments go to your lending bank on time – otherwise you will be charged a late payment penalty and your credit rating will not be one to boast about.

Generally when you take a salary transfer loan here in the UAE, a standing instruction to debit the equated monthly installment (EMI) every month is automatically activated when you sign the forms. Even for non salary transfer loans, banks will get you to sign a mandate to directly debit your account for the amount of the monthly EMI.

However you may miss a payment if your account has insufficient funds. In this case, the penalty fees are as follows:

* Islamic banks donate a portion of your late payment fee to charity as per the sharia laws.

** To be paid if a payment is more than 15 days past due date. Interest will be charged on all overdue payments at the lending rate set out in your agreement. This is in addition to the balance outstanding on your home loan, on which interest will continue to accrue on a daily basis.

[Compare personal loans | car loans | home loans]

Mobile phone and utility bills 

Unlike western or some Asian countries, there are no late fees here in the UAE for missing out on your Etisalat / Du or electricity and water bills. However, when you fail to pay on time, your connection may be disconnected by the government. In this case, you could be required to pay the connection charges once again for re-activation.

For SEWA, DEWA and ADWEA the re-connection charges are AED 100.

Prabal, a Sharjah resident says, “A couple of years ago I forgot to pay my SEWA bill by the due date. As a result, water and electricity supply to my house was completely cut off. Once I paid my bill, the supply was restarted within two hours. The next month’s bill though included a charge for re-connection.”

[Compare mobile phone plans]

Salik 

While driving in Dubai and passing through a Salik toll gate, you must have enough balance in your Salik card, or could end up with a huge amount of fines.

For new cars, if you pass through a Salik toll gate without the Salik tag on your vehicle you get a grace period of up to 10 days to open your Salik account or add the new tag to your existing one. Failing to do this will cost you AED 100 for the first day you pass, AED 200 for the second day and AED 400 for each subsequent day.

For cars that already have a tag, if you do not have enough balance in your Salik account and fail to recharge within five days, you will be fined AED 50 each time you pass through a Salik toll gate. In addition, a late payment penalty of AED 10 will be added to your account every month until recharged.

Dubai resident Martin says, “I procrastinated on topping up my Salik for so long that every time I passed through a gate I was fined AED 50 instead of the regular tiny charge. I think I spent around AED 600 in fines before I topped it up!”

[ Offer: Pay your fines in installment plans at 0% with Emirates NBD credit cards]

Renewing your car registration and driving license 

Cars in the UAE are required to be registered on a yearly basis. When you buy a new car, generally your dealer takes care of the registration process for you. However from the second year on wards you will have to do it yourself.

If registration is with the Dubai RTA, it must must be done one day before the registration expires or on the day of expiry as there is no grace period for any delay. Abu Dhabi transport authority however allows you to register until the car insurance expires – which is one month after registration expiry.

It is illegal to drive a vehicle post expiry of the registration. There is a fine of AED 25 per month (Dubai) and AED 10 per month (Abu Dhabi). If you are caught driving an unregistered vehicle, the Police would decide the penalty to be paid.

A Dubai resident who wished to remain anonymous had one such scary experience. “Two years ago, I had Salik fines to the tune of AED 14,000, and that’s when my car registration expired. To renew the registration I would have had to first pay off the fines. At the time, I had a liquidity crunch at home and did not renew the registration. Then when I took out my car on the roads, I was caught by the police and my car was impounded. Once I paid the entire fine and renewed the registration, I was able to get my car back.”

As for driving licenses, anyone aged 21 years and above gets a 10 year licence here in the UAE after passing their driving test. The normal cost of renewing the licence is AED 110, and you are charged AED 10 per month for failing to do so, in time. Also, your car registration cannot be renewed if the license is expired.

Abu Dhabi resident Rohit tells us his story, “When my UAE driving license expired, I was in the UK. On my return, two months had already passed since the expiry. Hence I paid AED 20 extra apart from the general renewal charges.”

Renewing your residence visa and Emirates ID 

If its time to renew your UAE residency visa, do it today. Not only will you incur penalties for not doing it on time, but it is also illegal. You get a grace period of 30 days to renew the visa and fees are AED 510 for three years. Failure to renew attracts a fine of AED 25 per day.

Every expat in the UAE gets an Emirates ID once their residency permit is stamped onto their passports. The ID which costs AED 270 has to be applied for within 14 days after the stamping process. If you don’t do it within this time you pay AED 20 per day (maximum AED 1,000) when you do go to get your Emirates ID made.

Priya, a Sharjah resident says, “We forgot to apply for the Emirates ID after my visa was stamped with a residency permit. When we did apply three months later we paid a fine of AED 1,000 plus the normal fee.”

Have you had any such experiences? Let us know in comments below.