Consumer Education Center

Opening a personal bank account provides an individual with a number of benefits. For example, it allows you to directly deposit your income, pay your rent and utilities bills, securely store savings and safely transfer money. 

Generally, there are two types of transaction accounts: a current account and a savings account. A current account allows you to write cheques for your expenses and use a debit card for purchases and ATM transactions. A savings account, on the other hand, may not allow the use of cheques because it is designed to promote savings by paying an interest rate on your balance.

You can open both, or either, types of accounts – whichever best suits your banking needs. When exploring options for a bank account, there are a few things which you should consider:

  • Availability and location of branches
  • Location of your bank’s ATMs near your home and work
  • Days and hours of service
  • Contact Center Services
  • Internet and digital services

When deciding to open an account, ask the bank representative about:

  • Ability to issues cheques
  • Access to a debit card
  • Rate of interest on savings accounts
  • Monthly and transaction fees
  • Returned cheque fees
  • Minimum balance requirements
  • Overdraft privileges and related costs
  • Cost for and ease of transfers of funds
  • Bank policy on holds on funds being deposited
  • Notice requirements to the branch for large withdrawals
  • Access to foreign currency

If you decide to open an account, you will be asked to sign account agreements. Be sure to take the time to understand your obligations. You should also be aware that it can take up to four business days to complete the account opening procedures.

To open an account, you will need to provide a number of documents. You should confirm with the bank beforehand exactly which documents are required and what the information the documents must include. Some of the information which may be required include the following:

  • Emirates ID
  • Passport copy in the absence of an Emirates ID
  • Current visa or some other proof of residency (UAE driving license, UAE Utility Bill, tenancy contract, another bank statement, etc.)
  • A letter from your employer confirming various matters.

Without the right documents and the right information, you will have difficulty in completing the account opening procedures. Make sure to talk to your bank first.

*If you are provided with a debit card with your account, ask about the withdrawal limits on your card, at which ATMs can be used and what are the transaction fees.  Remember that you should not share your security number (PIN) with anyone. If you do, you may be held liable for all unauthorized transactions made against your account.

NOTE: This information is not to be taken as legal advice nor does it provide all the details that will be required in opening an account. The obligations remain on the customer to understand their obligations.

There will come a time when you may need to take out a loan or borrow money.  The amount you borrow becomes a ‘debt’ that you owe to whoever has loaned you the amount, whether it is a financial institution, bank, friend, or family member. 

The reason for taking out a loan may vary. For example:

  • Dealing with unplanned events or emergencies (car repairs, home repairs, health costs)
  • Paying for planned expenses like tuition fees
  • Purchasing a major item (car, large appliances, property, etc.)
  • Covering income shortfalls when expenses exceed your income

Looking at loans from financial institutions specifically, when you are ready to sit down to discuss a loan, be prepared to provide detailed information about yourself. This can include the reason for your request, your income, expenses, assets and liabilities, or the amount of money which you’ve paid for a large purchase like a vehicle. You may also be asked to allow the financial institution to check your history of credit through a credit bureau.

A credit bureau can verify your information and reliability in terms of having paid your previous and current debts on time. Clients must disclose his/her full outstanding liabilities when shifting the salary from one bank to another. Failure to disclose may result in the new bank approving loan amounts which violate the legal lending limits.*

Depending on the purpose of the loan and the amount required, you may be offered a line of credit such as a credit card or perhaps a term loan.  A credit card or line of credit provides you with a borrowing limit of money that you can access as you required up to that limit. There will be monthly payments which will vary in depending on the amount of money you have borrowed. The interest rates are much higher with these types of loans as they are not secured against a specific asset like a vehicle or property. With these types of loans, you also have a choice to pay the balance owed at any time without a penalty.

The other type of loan, for example a car loan, a same day loan or mortgage, is a loan where the full amount is provided in full at the time of the purchase. There is then a schedule of payments at a set amount usually due once a month. The length of time (the term) for the loan will also be agreed to or limited by law.

The financial institution will evaluate your credit history, your ability to pay, the lawful limits on borrowing based on your income and the reason for borrowing, and if you have other assets.  The financial institution may also register a claim on the vehicle or property until the loan is paid off.

Before you sign any agreements, it is crucial that you understand the type of loan you are taking and the terms which you are agreeing to. Be sure to ask the right questions, such as:

  • What is the term of the loan (the number of months / years that the loan will last.)?
  • What is the annual interest rate?
  • Does the interest rate change? If so when? Do I receive a notice?
  • Does the payment included principle and interest?
  • Will the loan be paid off at the end of the term?
  • What is the penalty amount if the loan is paid out before the loan’s termination date?
  • What are the charges for obtaining the loan?
    • Legal fees
    • Appraisal fees
    • Administration fees
    • Inspection fees
    • Any other fees
  • What are the fees and charges if:
  • I am late on a payment?
  • I miss a payment?
  • I want to change the payment due date?
  • I want to change the payment amount?
  • I want to add a lump sum payment?
  • I want to renegotiate the loan?
  • Are there any other fees?

Once you compare interest rates, fees, charges, etc., and you agree to the loan offer, you will then be given a complex agreement to sign. You have every right to take the agreement home to read or have your lawyer review it before you sign.  It is a legal and binding document once signed, so it is important to understand what you are agreeing to.

Hint: Download this page and take it with you when you meet your lender, so you remember to ask the right questions.

NOTE: This document is not to be taken as legal advice nor does it provide all the details that will be in a loan agreement. The obligations remain on the borrowers to understand their obligations.

 

*Clients must be cautious when borrowing at an age of 55 (with intention to retire) and be sensitive to the allowable lending limit of 50% of salary. This is because, at retirement, the client’s salary may drop below the allowable limit for the amount of debt still owed. This may lead to an inability to service the debt.

Whether you are stressed about your spending or just need to manage your money more responsibly, the first step in getting your finances under control is by tracking them. If you are ready to improve your money management, then download the Budget Sheet and start tracking your income and spending today.

To begin, complete the budget sheet by estimating your monthly spending. By filling in all the expense details, you can see where your money is going. The next step is to complete a budget sheet at the end of the month with the actual expenses and revenues. Then, compare the actual spending with your first Budget Sheet estimate. With the comparison, ask yourself:

  • What was different between your estimate and the actual spending?
  • Why was it different?
  • Do I need to change my spending habits?

Continue to complete the budget sheet each month:

  • Do you have any money left over after your expenses?
  • If so, what happens to it?
  • Do you have a savings account where you can put the extra money?

You should start to consider your future and put that money away in savings for future needs. If your expenses are more than the money you receive then you are creating a problem that must be solved. Take a hard look at the expenses and see which are essential, and which are discretionary. Decide what can be reduced or eliminated. You may also need to find ways of increasing your revenues.

Budgeting helps you understand where your money goes and helps you begin to control your expenses. By controlling expenses or increasing your income, eventually you can begin to put money away to deal with financial emergencies or pay for your future goals. When expenses are under control, you will also help yourself by reducing the stress each month of not being able to pay your bills or being prepared for emergency expenses.

Ready to give it a try?

  1. Begin by downloading the Budget Sheet and fill it in with your best estimate as to what your expenses and revenues are; this will give you an idea as to where you think your money is going
  2. Begin to keep track of receipts or note each time you spend money
  3. Put the receipts in one spot each day, perhaps in a drawer at home.
  4. At the end of the month take the receipts, your bank statement and credit card statement and begin filling in the Budget Sheet with your actual expenses and income
  5. Add up the income and expenses and see what the difference is: do you have money left over or are you going into debt just to pay for your monthly expenses?
  6. Next, compare the actual budget sheet with the first one that you had completed with your estimated expenses: are there differences and why?
  7. Ask yourself if this spending is sustainable, and, if not, decide what must be done to ensure your financial future
  8. Continue tracking your expenses each month and see if you are making a difference

Relying on your credit card or on borrowing money just to meet monthly expenses will eventually have consequences, so begin managing your money now.

MONTHLY BUDGET SHEET ENGLISH.pdf

A mortgage is a type of loan that is normally used to finance the purchase of property, like a new home or an investment property.* When you are considering buying a property and need to obtain a loan to pay for it, you should shop around and compare interest rates that are offered. Banks will negotiate depending upon factors such as the quality of the property, the amount of down payment, your credit rating and so forth.

When you are ready to meet with a few financial institutions to discuss a mortgage, be prepared to provide answers to their questions about the property, your income, expenses, assets, liabilities and the amount of money you must help pay for the property. The financial institution will register a claim on the property until the loan is paid off.

You have the right to ask questions to ensure you understand your key obligations before signing. For example:

  • The Amortization period of the mortgage loan: how many years will it take to pay off the mortgage?
  • The term of the loan is the length of time that the bank will provide you the loan:  the mortgage loan agreement normally terminates after a period of time (for example, 1 to 5 years), after which you may ask to renew the loan for the balance of the loan, pay it out or transfer it to another financial institution.
  • What is the annual interest rate?
  • Does the interest rate change, and if so, when?
  • How much principle and interest will be paid at the end of the term of the loan?
  • What is the penalty amount if the mortgage is paid out before the loan’s termination date?
  • What are the charges for obtaining the mortgage?
  • Legal fees
  • Appraisal fees
  • Administration fees
  • Inspection fees
  • Registration of the mortgage
  • What are the fees and charges if:
  • I am late on a payment?
  • I miss a payment?
  • I change the payment due date?
  • I change the payment amount?
  • I want to add a lump sum payment?
  • I renew the mortgage?
  • Are there any other fees?

Once you compare interest rates, fees, and charges, and you agree to a mortgage, you will also be given a complex agreement. You should ask to have your lawyer review it before you sign anything. It is a legally binding document once you sign and it is important that you understand what you are agreeing to.

*If you are seeking a mortgage for a rental property as an investment, then ensure the rental income will be more than your costs including the cost of borrowing, any service fees on the property and the likelihood it may take time to rent the property

 

Hint: Download this page and take it with you when you meet your lender so you remember to ask the questions.

NOTE: This document is not to be taken as legal advice nor does it provide all the details that will be in a mortgage agreement. The obligations remain on the borrower to understand their obligations.

Consumer Tips