Credit Cards

Credit Cards – Boon or a Bane? – Part 1

Author:  Nadeem Syed – Banker
Nadeem Syed

This is part 1 of a two part article written by Nadeem Syed- our Advisor on Banking matters. It explains in simple terms working of a Credit card – a modern financial product that affects our daily lives and may practically be considered as a commercial necessity. It explains the working and background and also suggests some useful tips to avoid getting into Credit card trouble!


What is a Credit card?

A Credit Card is a plastic card that allows the user to purchase goods and service on Credit (or a loan) with a promise to settle the credit on pre-agreed terms within a pre-agreed time against an approved Credit limit (“Credit card limit”).


Cambridge Dictionary defines it as “a small plastic card that can be used as a method of payment, the money being taken from you at a later time.” Period of this credit settlement can vary from few weeks to few months under a standard contract. A typical card would provide a credit settlement option (against a Credit limit) which can range from 1.5% to 100% of the credit amount (usually a minimum of 5% or a flat fee of AED 100 in UAE).


Credit Cards are also useful and handy because they allow the users to avoid carrying large amounts of money (banknotes / physical cash) reducing the risk of physical loss of cash.


In this digital era of online shopping and other internet based services and utilities, credit cards provide an easy and secure payment method for conducting online transactions/purchases.


Interest (card fee in case of Islamic Credit cards) is charged on the outstanding credit amount periodically. In case of any delays in payments extra penalties / interest would be charged and added to the credit card outstanding balance. A Credit card may also carry an annual fee in addition to interest, payable upfront or in installments.



The idea of the Credit Cards was introduced in late 19th century by a certain Edward Bellamy, who had written a novel “Looking Backwards”. In it Bellamy referred to people using credit cards as an item to purchase goods. By 1930s Cards were in almost every household of USA. This invention changed the world and soon became an important part in everyone’s life.


It also gave birth to idea of a Cashless society! Towards which the world seems to be heading. It provides more convenience but not without a cost and hazards which we will discuss below.

Credit cards in recent years have becoming increasingly sophisticated financial instruments with added features shopping points, airline travel miles, insurance coverage, etc. It’s quite possible that the Credit card of tomorrow is not a “card” any more but rather a chip imbedded in our hand!


Difference between Credit and Debit Card

People often get confused between a Debit Card and a Credit Card. In a Debit card, funds are deducted instantly from the user’s bank account upon usage. However, a Credit card offers a Credit facility to the card holder to pay at a later time, fully or in deferred payments over a period of time.


Credit Cards – Boon or a bane?

If used prudently, this financial product will bring about benefits for its user by enhancing their life style as well as ease. However, used irresponsibly, it can certainly prove to be a bane that can bring about disastrous consequences such as loss of integrity and often severe penalties including jail term that could result in bankruptcy in extreme cases.

Ending Note:

Our team has extensive experience in this field with expertise in legal and commercial matters and can advise persons who may be in financial distress due to credit card obligations.


Authors Profile


Nadeem Syed is a seasoned Banker with over 25 years of banking experience, out which 17 years have been with banks in UAE.


He has a rich experience in the areas of Corporate, SME &Retail, Investment banking, Risk management, Trade Finance, and Credit strategy.


He also specializes in area of Islamic finance and has worked in senior level positions at Emirates Islamic, Dubai Islamic Bank, etc. Currently works as a Consultant and is associated with us as a specialist in Banking and financial matters.