The Debt Panel ‘Can I get annual fees waived on an unused credit card?’
▶ Our experts advise a reader who has accrued a significant amount by way of penalties and interest charges
Afew years ago, I accepted a credit card offer from an agent who was representing a bank in the UAE. The agent contacted me by phone; it was a cold call and I do not know how they got my number.
I did not check the terms and conditions set by the card issuer, but thought it was easy credit at the time and I could use it to cover emergencies.
I have never used the card and, in hindsight, should never have agreed to go ahead with the agent’s offer.
However, I have recently discovered that the credit card carries an annual fee after checking an old email account that I rarely use.
As I have not paid any of the annual fees, it has increased quite a lot because of late penalties and interest charges. Is there a way to convince the bank to waive the fees as I have not used the card? And will this be reflected on my credit score? EG, Dubai
Debt panellist 1 R Deepakchandran, group head of retail products at Emirates NBD
Credit cards can be broadly classified into two types: Feebased and free of annual fees, each designed to cater to different customer segments.
Fee-based credit cards charge an annual fee to cover administrative and maintenance costs. They also offer additional features and perks – such as higher reward rates, membership or points programmes, discounts and promotions, travel insurance, airport lounge access and concierge services – that are exclusive and meant to enhance a customer’s lifestyle.
Hence, while applying for a credit card, it is important to review the terms and conditions and the schedule of charges applicable to your account. In your current scenario, it is advisable to contact your bank and explain your present situation, given the circumstances.
Most banks will reverse the annual maintenance fees and subsequent charges if there is no spending activity on the credit card. Once the outstanding amount is cleared, the system will automatically resolve the issue and clear your credit report.
If you are not interested in paying the annual maintenance fees or keeping the card, I suggest that you contact your bank to inquire about changing it to a fee-free option. It is commendable you are reaching out for assistance and taking control of the situation.
Debt panellist 2 Jaya Ratnani, managing partner at Freed Financial Services
Unlike debit cards, credit cards come with several charges associated with them, which most of us tend not to understand.
However, these fees and charges accumulate over time and stack up into a heap of inescapable debt. To avoid debt, it is important to be aware of the charges that are applicable to your credit card.
The annual fee depends on the type of card you own. The higher the benefits, the higher the fees. We normally tend to not remember this charge as it is an annual fee. Some cards normally come with an advertisement of no annual fee.
However, this is usually for only the first year. Your situation is ironic and a common phenomenon, where the fees are accrued on a credit card that is not used. You need to understand that your account is automatically activated when your application is approved. This means that even if you do not activate the credit card, you will still have to pay the annual fee associated with it unless you cancel it.
I recommend setting up an in-person meeting with a senior officer at the bank and explaining your situation to them. If you are an existing customer, you can ask them to waive the annual fees that have been accumulated so far. Once the issue is resolved with the bank, request a no-liability letter. The bank should notify Al Etihad Credit Bureau in its monthly report about the closure of the card. When the bureau receives the new data, it will update your credit report, which will lead to a change in your credit score.
Debt panellist 3 Alison Soltani, founder of Leap Savvy Savers
You can contact the bank’s relationship manager, offer to pay the total annual fee and request that they waive the interest and charges.
It may be more effective to visit the branch and explain your situation.
Take with you all your statements to show that you have not used the card.
If you have any other ties with the bank such as accounts, cards or loans that you pay regularly, show the statements to prove that, under normal circumstances, you are a reliable customer.
However, the fact that you signed the contract and activated the card means that the bank has a right to levy the fees, as long as they are set out in the terms and conditions of the credit card contract.
They also sent you the statement by email so they can claim that they informed you about the charges.
Depending on the amount owed, you could enlist the services of a solicitor to negotiate with the bank on your behalf, but it may be worth paying it off and chalking it up to experience.
The issue is expected to affect your credit score but this should recover quickly once the charges are cleared and as long as you keep up with your other payments and bills.
It is easy to check your credit score with AECB by filling in the form on its website or calling 800 287 328.
You can download a full individual report for Dh84 (including VAT).
Your credit score is calculated based on a number of factors, including credit history, payment history, credit utilisation, types of account and total credit inquiries.
A score above 700 is considered creditworthy. Therefore, if you have other bills and accounts that are paid on time, then this outstanding debt may not be unduly detrimental to the overall score.
To prevent this issue in the future, it is useful to keep track of all your accounts, loans, cards and investments in a spreadsheet or notebook and regularly check your credit report for inconsistencies.
Checking once or twice a year normally suffices to identify any irregularities in your finances, at which time you can investigate and resolve the issue before the charges become unmanageable.