Spending and saving
A remarkable number of expats come to Dubai with the best financial intentions only to find themselves, a few years down the road, in debt and with very little to show fiscally for their time spent here. The cost of living varies depending on the product in question: petrol is about the cheapest here than anywhere in the world, but rents (though on the way down) are still comparable to Manhattan. Big Macs and bottled water cost less here than just about anywhere else, but a fast internet connection won’t be as cheap.
The bottom line is that if you continue to spend the same way here as you would at home and save the surplus, you can potentially leave Dubai with a sizeable fund for the future. It won’t be the necessities that cut into your savings scheme, it’s the luxuries that trip up most expats. Because babysitters and restaurants generally cost much less here than at home, for example, it’s easy to fall into the habit of eating out every night.
A giant villa is obviously more comfortable than a high-rise flat, but between rent and utilities, you’ll probably end up paying a sizeable chunk of your income for it. In other words, if your priority is to live a comfortable lifestyle while you’re here, you can, but if you’re goal is to save money, pay close attention to how much you spend on those indulgences you would be content to live without if you were at home.
Many international banks are represented in Dubai, alongside local banks, which range from giants such as National Bank of Dubai and Abu Dhabi Commercial Bank, to smaller one-branch outfits. There are relatively few overseas investment banks, and current federal law restricts foreign banks to no more than eight branches each.
Although in recent years customer service has improved, there are moments when taking a deep breath and counting to 10 is the only solution. This is especially true when contacting a bank by telephone. However, if you go in person to certain branches, you can find the staff are generally helpful and polite. You will almost certainly find that everything takes longer than you are promised. If someone tells you opening an account will take five days, expect two weeks. If they say a loan application will take two weeks, expect a month.
There was a time when banks seemed to throw money at you, however, due to the current financial climate, they have tightened their purse strings. This can make it trickier for a fresh, average-paid expat to get a credit card or a loan.
Opening an account
The process here is similar to most other countries. It is a wise idea to phone around and compare rates. Although interest rates on typical savings accounts are not high – usually only between 0.5 and 1.5 per cent, there are options for building your nest egg.
Most banks expect a minimum monthly balance of Dhs5,000, and you will be charged Dhs50-75 per month if you go below this. However, it is worth checking who your employer banks with, as some banks may be willing to lower or wave the limit altogether for an employee of one of its clients. Once you have made your decision, it is worth notifying the bank in advance rather than just turning up, as many will send a representative to meet you at your workplace and go through the paperwork there.
You must have your original passport plus copies (complete with residency visa), along with a letter from your employer confirming that you are employed, and a salary certificate. An account with a chequebook and an ATM card will be yours within a couple of weeks. Be warned that in Dubai, bouncing a cheque can lead to heavy fines or even a prison sentence.
When you leave Dubai, or switch employment, your bank account may be temporarily frozen, because your account is dependant upon the visa provided by your employer. The bank will then consolidate any outstanding loans. Although the process shouldn’t take longer than a week, it can drag on, particularly if you leave in less than amicable circumstances. It’s worth maintaining a small sum of easily accessible cash if you foresee a change of visa on the horizon.
Banking hours are generally Sat-Wed 8am-1pm; Thu 8am-noon. Many banks also open in the afternoons from around 4pm-6.30pm. Banks are closed on Fridays and public holidays.
Most bank branches have an ATM. These are also found in shopping malls, hotels and petrol stations. Most credit cards, Cirrus and Plus-enabled cash cards are accepted, although it is worth checking with your home bank what fees will be charged. Dubai banks will usually not charge you for using their own ATM machine, but a standard rate of Dhs2 is charged by most banks if you withdraw money from a competitor’s machine or Dhs1 for a balance enquiry. Most retail outlets and businesses accept a range of cards, including Switch and Maestro.
Banks here are slowly catching on to internet banking, but, unfortunately, even those that have a site still regularly experience technical glitches. It is also surprising that the banks that do offer online account services still charge a fee for things such as transferring money from your UAE account to one abroad. These fees vary according to each branch, but are usually lower than those for transferring money in person – around Dhs40 per transaction.
While all of the banks listed in the table provide savings plans, if you want to get serious about making the most of your income, it’s worth meeting with a financial adviser. A good one will assess both your assets and your spending and make a recommendation for the best ways for you to go about making your money work for you by setting up off-shore accounts, wills, life insurance, and the like. Some even provide mortgages and can help you get the best exchange rate on money you send overseas.
Western Union and Al Ghurair Exchange both offer competitive rates and transfer fees. These are often cheaper than the banks’ fees. Al Ghurair (04 262 3377) charges just Dhs40 for a transfer of Dhs2,000 in five working days. It keeps your details on file, so after the first transaction you’ll just have to provide your name and the readies. Banks abroad also usually charge to receive the money – so check how much this will cost to make sure you’re still getting the best deal. Western Union (www.westernunion.com) charges Dhs170 for an instant transfer of Dhs2,000, so if you’re in a hurry to get your dosh out of the country, this is a convenient option. Banks often require a ‘swift code’ from the foreign bank you want to transfer money to. If your bank doesn’t have one, its Iban number is usually sufficient. If this isn’t immediately obvious on the bank’s website, try the call centre.
Credit cards & cheques
Some banks will offer you a credit card as a matter of course when you open your current account. However, others have recently introduced policies that only allow you to have a credit card once you have been working at your company for six months, so you may have to wait. Most banks offer competitively priced credit cards, and once you’ve proven that you’re reliable and have a secure income, you may find the company with which you do business is more than happy to thrust additional credit upon you. Many even offer perks such as air miles or frequent flyer points that you can use on major airlines, points that can really add up over time.
Monthly interest charges tend to be around 1-2.5 per cent depending on the type of credit card you get. Although some banks prefer you to pay your salary into a current account with them, others will accept your application pending a security check and on provision of two months of bank statements and proof of a valid residency visa. Fines for late payment vary, but are around Dhs100. It’s worth shopping around as some credit cards also have an annual fee of about Dhs400.
There are few circumstances in which you’ll need to write cheques, but just about all the major bank accounts offer a chequing option. If you’d rather not hassle with a cheque book, your bank can provide you with individual cheques on those rare occasions when you need them, but it will cost a small fee. If you happen to bounce a cheque, your bank is likely to consider the incident an oversight and simply charge you a fee to cover the cost. The fact, however, is that if you give someone a promissory note that your account can’t cover, you’re essentially stealing so, in some cases, your bank may take more drastic measures to discourage you from writing bad cheques. See You and the Law on p22 for more information.
Many expats arriving in the city find themselves in the unenviable situation of having to magic up a year’s worth of rent in one intimidating payment, and for many newcomers a bank loan is the only option when they settle in. Things have changed since the global recession, and these days many landlords are happy to negotiate with monthly or quarterly cheques, diminishing the demand for loans somewhat. Since the recession (and the scores of expats absconding without paying debts) banks are also taking measures to ensure their own security and have recently raised the earning threshold for giving out loans at all – so if you’re one of the average joes out here who doesn’t earn a fortune, you may be turned away from a few places. However it can still be relatively easy to acquire a loan, especially if you have your salary deposited directly into your bank account each month. Because they earn their income from charging you interest, banks might be willing to take a chance on customers who seem trustworthy so it’s worthwhile arranging a meeting. Most banks have certain criteria, which will affect the rates you are offered.
However, if you qualify for one and your employer is listed with the bank as a pre-approved company, this will mean you receive preferential rates and are able to borrow larger sums over longer periods of time. In addition, if you have completed one year of service with the company, you may also be eligible for a lower interest rate. Many banks will ask that you transfer your salary into one of their accounts, and take the monthly repayment directly from your account on payday. Banks offering car loans do not usually require you to have a bank account with them. Others may also make it very easy for you to borrow more money by ‘topping up’ an existing loan. But before you take out any type of loan, it is crucial to assess your financial situation and consider what might happen should you lose your job. While there are certain bankruptcy laws in place in the UAE, defaulting on debt is taken very seriously.
Defaulting on debt
Unfortunately for expatriates as a group, there have been some unscrupulous individuals who have taken out large loans and absconded. In many Western countries like the US, the UK, and Australia, one central agency monitors each person’s individual credit history, but there is currently no such system in place in the UAE. In the past, there was often little the local banks could do to pursue the culprits other than take greater precautions in loaning to other expats still living in the country. These days, however, major banks may try to engage international collection agencies to recoup their debt.
Many argue there is little support or choice for expatriates who run into bad luck. It is a criminal offence for a cheque to be dishonoured in the UAE and absconding can seem like the only alternative. However, the consequences are dire: you can face potential imprisonment on re-entry to the country (even if just passing through in transit).
If you run into trouble, there are options. Mark Hiess of Dubai law firm Clyde & Company says most creditors are willing to negotiate the terms of debt, and there is the potential to agree on a revised payment schedule. There is also a UAE bankruptcy law, which involves administrative restrictions imposed on the debtor called ‘Hajr’ in Arabic (a Restriction). This is a court-driven process that places a restriction on the debtor’s property and assets, which are sold and divided among the creditors on a pro-rata basis.
For legal advice, contact Clyde & Co on (04 312 8518; www.clydeco.com).