Despite the gains we’ve have made chipping away at our collective debt, many Americans still struggle to balance the weight of their credit card debt every month. People carrying a lot of debt have little opportunity to transfer balances to cards with lower APRs, and missed payments can tack on fees and penalty rates of around 25 or 30 percent. We just don’t know how good we have it.
As a recent article in The New York Times points out, the situation in the United Arab Emirates is far grimmer for people with a debilitating credit card debt. The industry is subject to far less regulation than it is here, and credit card issuers in recent years have aggressively targeted financially unsophisticated migrant workers that make up the vast majority of the country’s population.
Despite its fanciful skyscrapers and its embrace of all manner of modern luxuries, the U.A.E. also has what we’d consider a vestige of a pre-industrial economy: debtors’ prisons. What makes it even harder for people to get out of debt there is that the industry is an unregulated Wild West — the country doesn’t even have a functioning credit bureau.
The average interest rate is a 36 percent — several percentage points above the typical penalty rate in the U.S. Penalty rates there can even climb to 50 percent, making it almost impossible for indebted people to make good on what they owe. Unlike here, people can be thrown in jail for their debts for several weeks, and when they get out, they still have to pay it back. Outstanding bills on several cards can lead to multiple stints in prison.
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The Times article chronicles the woes of workers arriving from countries like the Philippines being pressured into signing up for cards of which they have little knowledge of the risks or terms, then quickly find themselves over their heads in debt. Many migrant workers are supporting extended families back in their home countries, so the easy credit at first seems like a lifeline — until it becomes a noose.