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Thursday, July 06, 2006

Psst, Wanna Credit Card?

Scarcely a week goes by when I don't get a phone call from a bank wanting me to 'avail' of their latest offer on credit cards. Had one this morning, from HSBC, my own bank.

HSBC: 'ulloooooo
ME: yes, who is this?
HSBC: 'ulloo, Mr Keefieboy?
ME: yes, who is this and what can I do for you?
HSBC: this is HSBC, do you have two minutes?
ME: are you trying to sell me a credit card?
HSBC: no sir, not sell, it's free!
ME (on the floor laughing): free! you mean no annual subscription but massive interest calculated every nanosecond?
HSBC: yes sir
ME: thank you but no
HSBC: but sir, it's free!
ME: bye bye and have a nice life

I've learned two things while living in this town:
1) As an expat, do not take on debt unless you are 200% sure you can clear it before you want to leave
and
2) I am not 'creditworthy'

The first point should be fairly obvious. The second might be surprising. But as the owner of a tiny business I am regarded by banks as 'self-employed'. Which they seem to think means that I just invent my earnings. My accounts are not audited, some of the income never actually goes into the bank, some of it goes in as cash, and if you had a suspicious mind (a given if you are a banker) you might think that I was just circulating one chunk of money from one account to another. So it always tickles me to talk to credit card salesman in the certain knowledge that if I did decide to apply for their product, my application would be declined.

I have this Calvinist thing in my head. Say I want to buy a brand-new Beemer. It costs Dhs 200,000. Look in wallet. Somewhat less than Dhs 200,000 in there. Check bank account - close to zero. Dang, ain't got the money, therefore can't have the product. Easy-peasy.

Had a call a few weeks ago, from Dubai Islamic Bank:

DIB: 'ulloooooo
ME: yes, who is this?
DIB: 'ulloo, Mr Keefieboy?
ME: yes, who is this and what can I do for you?
DIB: this is Dubai Islamic Bank, do you have two minutes?
ME: are you trying to sell me a credit card?
DIB: yes sir, the world's first Islamic credit card!
ME (on the floor laughing): you jest, surely!
DIB: ?
ME: well credit cards are the highest form of riba (usury) after loan sharks are they not?
DIB: ??
ME: go on then, tell me, but I'm not buying
DIB: there is no interest on the outstanding balance, only a monthly fee...
ME: how much is the monthly fee?
DIB: dhs 15
ME: great! So if I have an outstanding balance of Dhs 20,000, I only pay dhs 15 per month?
DIB: ah, no, it would be quite a bit more.
ME: so what you're saying is the monthly fee is a bit like interest, but you just call it by a different name?
DIB: yes sir
ME: that makes me feel so much better. Thank you and goodbye

18 Comments:

Anonymous Anonymous said...

Ohhh, thats what I'm sayin! Its Islamic interest, I guess lol

12:32 am  
Blogger Tainted Female said...

This has always perplexed me about ‘Islamic Banks’. I don’t know enough about how they operate to criticize, but I’ve heard so many similar stories to yours here, that it’s hard not to. Label wine with the word ‘Islamic’ and it’s no longer haram (a sin for Muslims)?

And I used to work in Citibank, credit card sales. You ever wonder why the same bank will call you over and over again, though you’ve respectfully declined their offer a million times over in the past? Absolutely no prospect customer data base, neither individual nor general, can be found inside. About the only records that can be found are those of customers that already owe them.

All banks here are a mess. It’s probably best for you that you’re not creditworthy.

5:21 pm  
Blogger Hina said...

I've been reading your blog for quite some time now... Just thought I would write in something and let you know how you crack me up with all your posts.

Thanks!

11:43 pm  
Blogger secretdubai said...

Fantastic! I quote it on Aqoul.com

2:14 am  
Blogger Grumpy Goat said...

My understanding of how Islamic finance works is illustrated below by looking at a couple of hypothetical options to buy a car. No deposit terms, and the car costs Dh60,000 to be paid for over two years.

Option 1: Haraam System for Buying Cars

Borrow Dh60,000 over 2 years at a 4% interest rate.
You pay Dh2,700 a month for 24 months.
Total paid is Dh64,800

Option 2: Islamic Finance

The Bank buys the car at its market price of Dh60,000 (presumably).
The bank sells the car to you at the competitive Murabaha profit rate of Dh64,800.

You pay Dh2,700 a month for 24 months.
Total paid is Dh64,800. There's a coincidence.


But what if you have a windfall a year into the loan period?

With Option 1, you have paid Dh32,400 in capital plus interest.
But by paying off the outstanding balance after 12 months, you save 4% x the outstanding Dh30,000.
You save Dh1,200. (I think. It might be as much as Dh2,400 if you're very lucky. I don't actually know how to work it out.)

But with Option 2 you still owe the bank the total Dh64,800. There is therefore zero incentive to pay off the loan early.

What happens if you aren't as rich as you'd imagined and you have to reschedule the loan over three years?

With Option 1 there is additional interest to be paid.

And with Option 2? Apparently the loan defaulter gets 'blacklisted'.

E&OE

2:25 pm  
Blogger Woke said...

Absolutely!

2:34 pm  
Blogger Keefieboy said...

Grumpy: love the acronym for te Haram System!

3:10 pm  
Blogger halfmanhalfbeer said...

Having worked for one of the banks mentioned here for a number of years I can absolutely confirm that everybody knows that all they are doing is changing a few words and putting on a fresh coat of paint over a standard product. The intention is to arrive at exactly the same place where the customer pays heavily for the privilege of using the banks services (used in the loosest possible sense of the word as the chance of actually getting any ‘service’ out of a bank here is pretty much zero).

What I used to find staggering was when the latest ‘sharia–compliant’ product was launched and we had to sit through internal meetings to be told all about it they would inevitably start off with “this is exactly the same as the ABC product but we are calling it XYZ” and all without the slightest trace of embarrassment.

Hic

12:33 pm  
Blogger kaya said...

I have no credit card, and I dont even have a bank account. I keep my money in an earthenware pot buried under the old gum tree wherein singeth ye old kookaburra.

7:23 pm  
Anonymous Anonymous said...

"As an expat, do not take on debt unless you are 200% sure you can clear it before you want to leave"

Can one not just do a runner? It's the least the banks here deserve

8:38 am  
Blogger Grumpy Goat said...

But the bank won't lend you money unless you produce a guarantor.

"Here is my patsy who agrees to pay off my loan or go to jail if I should abscond."

Can you imagine people queuing up to guarantee other people's loans?

Anyway, as in Blackadder 2 "The Black Bank has branches everywhere."

9:05 am  
Blogger Marius said...

What happen if you take a car loan and after sometime you're not able to pay the loan? Than you give back the car to the bank, they sell it and there is an outstanding amount to be paid. After which period of time you get blacklisted in UAE? I have a friend who lost his job and gave the car back to the Bank (HSBC), left the country, have the residence visa available and wants to go back in Dubai (he have an offer from an employer)

1:25 pm  
Blogger Keefieboy said...

Marius: I don't know about blacklisting - it may be that your friend could be put on a credit blacklist, but that shouldn't affect him being able to return to the UAE. Don't quote me on this though - seek professional advice!

3:43 pm  
Blogger Marius said...

The guy has a promise to work with DU, and has to be in Dubai in 10-15 days to get an offer.
He left Dubai, without visa cancellation, because the company who work with became bankrupt. So he left in May and now wants to get back and he is affraid to don't have problems in the Airport. He wants to pay back everything till last penny.
I don't know whom to ask, because he's affraid.

5:33 pm  
Blogger Keefieboy said...

Marius: oh dear. If the guy left owing a bank money it's highly likely that they will have filed a case, in which he will be detained on entry. All I can suggest is that he talk to this bank and find out what the score is. Or ask the police if he's on their wanted list.

5:42 pm  
Anonymous Anonymous said...

I have 2 credit cards from abn amro and one from citibank. Total outstanding i have to pay for this banks is nearly 60000 dhs. If i am leaving the country without paying this amount, is this banks can capture me in india ?

3:28 pm  
Blogger Care said...

What do you do if you've lost your job and owe the bank money and there is a case against you? also, because of the case you are in the country illegally because if you try to leave you will be arrested and...you have now been offered a job and your potential employer is negotiating with the bank to drop the case so that your visa status can be legalised and the bank says no?

1:45 pm  
Blogger Keefieboy said...

Care: 'and the bank says no'. Sheesh, I don't know...but in the light of the Chief of Police's recent comments about the banks being the real criminals in debt cases, he might be interested in a letter about this situation.

3:29 pm  

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