Credit card spending in the UAE is projected to grow from around $150 billion in 2024 to $240 billion by 2029, fuelled by both consumer demand and rising financial pressure. According to Milad Azar, market analyst at XTB MENA, the driving forces are shifting. While banks continue to promote cashback and travel rewards, many residents are turning to credit cards out of necessity.
“The reality is that for a growing number of people in the UAE, cards aren’t about perks anymore,” said Azar. “They’ve become a financial tool to cover basic costs.” That shift comes amid a higher cost of living, stagnant wage growth, and increased reliance on borrowed spending, especially among younger users.
Generational debt divide
A growing generational divide is emerging in how credit is used. Gen Z borrowers, in particular, are accumulating more debt relative to income than their millennial or Gen X counterparts did at the same age. Azar warned that this leaves them more exposed to falling into long-term debt cycles.
One of the most common pitfalls is the “minimum payment trap.” With UAE credit cards often carrying annual interest rates of 40% or more, compounded daily, even a short period of underpayment can lead to a ballooning balance. “What starts as a small unpaid amount can grow rapidly,” Azar said, “and once it does, it’s very difficult to escape.”
Compounding interest calculated daily, more aggressive than monthly models in other markets, accelerates this debt load. Azar noted that unlike in some countries where interest is front-loaded, UAE borrowers may not fully realise how fast their unpaid balances are growing until it’s too late.
When rewards cost more than they pay
Despite rising financial stress, rewards schemes remain a strong marketing draw. But Azar cautions that the benefits often fail to outweigh the cost unless used with full repayment discipline. “If you’re not paying your balance in full every month, you’re essentially paying for your rewards with interest,” he said.
Many cards carry high annual fees, minimum spend thresholds, and caps on rewards that reduce their real-world value. “The best rewards are the ones that align with your existing spending habits, not ones that incentivise you to spend more than you should,” Azar said.
Analysts also note that in a no-tax, high-income environment like the UAE, behavioural spending can easily outpace actual affordability. That’s especially true when credit cards become proxies for liquidity, rather than short-term convenience.
AECB score dynamics and credit strategy
The Al Etihad Credit Bureau (AECB) score, which ranges from 300 to 900, plays a key role in determining access to loans and future credit. High utilisation, generally considered anything above 30% of the card’s limit, can significantly drag down a user’s score, even if they make timely payments.
Azar recommends that consumers avoid concentrating their usage on a single card. “Having multiple cards with low utilisation is often better for your score than maxing out one,” he explained. “But they must be managed properly, with consistent payments across all cards.”
Cancelling cards, especially older ones, should be a last resort. “It shortens your credit history and increases your utilisation ratio overnight,” Azar said. An alternative is to ask the bank to downgrade the product while retaining the credit line, preserving the score’s stability.
For borrowers already struggling with balances across multiple cards, consolidating debt into a single personal loan at a lower interest rate may help reduce the total repayment burden and simplify management. Unlike credit card interest, personal loan rates are typically fixed and lower, with clearer repayment terms.
Choosing the right card
Azar encourages consumers to look past promotional offers and compare cards based on total cost of ownership. This means assessing the APR, annual fees, penalty clauses, and hidden caps on reward redemption. “Too many people choose cards based on upfront bonuses and later realise they’re paying more than they earn from the perks.”
Azar also warned against applying for multiple cards at once, as too many hard inquiries can lower the AECB score. Instead, he recommends a considered approach: select cards that support your lifestyle, ensure your budget can accommodate full monthly payments, and review your usage periodically.
With credit card spending projected to grow 60% over the next five years, Azar believes the challenge for UAE consumers isn’t just about avoiding debt, it’s about understanding the system behind it. “A credit card can be a useful financial instrument or a long-term liability. The difference comes down to how well you manage it.”
