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Economy & Finance

For a Handful of Dirhams: Currency and Payment Options in the UAE

Expats moving to the UAE should be prepared for a nation where cash remains king, although international credit cards are widely accepted. Find more information on popular payment options and the Emirati currency in our Expat Guide to the UAE!

The local currency in the UAE is the United Arab Emirates dirham (AED), or just dirham for short. It was introduced in May 1973, fewer than two years after the Emirates became an independent nation. The new UAE currency — whose name is actually derived from the Greek expression for ”grasping”, a ”handful” — replaced a variety of currencies that had been in use in the Persian Gulf region in the years prior to independence.

In all emirates, the so-called Gulf rupee was widely used from 1959 to 1966. After that, six out of seven — except for Abu Dhabi — opted first for the Saudi riyal, then for the Qatar and Dubai riyal. In Abu Dhabi, the Bahraini dinar was legal tender before the dirham was officially introduced.

Nowadays, rumors concerning a planned monetary union between the GCC member states have been circulating for years. However, while there is indeed a GCC Monetary Council, there has been no concrete development with regard to a unified currency for the Arab states of the Persian Gulf.

Moreover, the Emirates would probably opt out of it anyway. In fact, the UAE did already back out of the discussions regarding a potential common currency when the newly established Monetary Council was to be located in Riyadh rather than Dubai City. So it seems that the dirham will be here to stay.

While inflation in the UAE has decreased considerably since the record high of 12.3% in 2008, the UAE currency is still subject to a certain annual depreciation. According to the World Bank, the yearly inflation rate recently ranged from 0.9% (2010) to 2.3% (2014). Some other sources assume that the annual inflation has risen again, putting it at an estimated 4% or more in 2015.

Falcons, Daggers, and Dhows — Oh My! The UAE’s Coins and Banknotes

The local currency is issued by the Central Bank of the UAE, the successor of the former Currency Board. As the name implies, the latter was also founded in 1973 for introducing and then managing the new currency.

Today the Central Bank has a much wider range of power, especially when it comes to regulating banks in the UAE and governing the country’s monetary policies. Still, it remains responsible for minting coins and printing banknotes, among many other things.

1 AED is equal to 100 fils. Coins are available for 1 fils, 5 fils, 10 fils, 25 fils, 50 fils, and 1 AED. However, while the smallest coins for 1, 5, and 10 fils do technically exist, they are rather rare in circulation and actual use, especially the 1 fils coins.

The banknotes for the UAE currency include 5 AED (brown), 10 AED (green), 20 AED (light blue), 50 AED (purple), 100 AED (pink), 200 AED (yellow-brown), 500 AED (navy), and 1,000 AED (light green-and-blue). But if you should ever come across a green-brown 200 AED note in your wallet, don’t panic! This isn’t counterfeit money, but just an older issue from the 1989 series, while the newer, yellowish notes date from 2008 onwards.

The banknotes usually show significant buildings across the UAE (e.g. the famous Jumeirah Mosque in Dubai), typical animals of the Persian Gulf region (e.g. an oryx antelope or a falcon), and objects traditionally associated with life in the UAE (e.g. a khanjar dagger or a dhow sailing vessel).

Ch-ch-changes: Currency Exchange and Cash Import

The currency in the UAE is pegged to the US dollar. 1 USD equals 3.6725 AED, and 1 AED is worth about 27 US cents.

You can easily exchange big international currencies, such as US dollars, euros, or British pounds, and the currencies of neighboring countries for dirham once you have arrived in the UAE. Currency exchange offices — often called bureau de change — are located in most malls and shopping districts. Their rates are normally more competitive than those offered in major hotels and even in some banks.

When you bring money into the country, though — be it dirham or any other currency — please take the UAE’s import restrictions into consideration. If you import cash or traveler’s cheques worth more than 40,000 AED (or its equivalent in a foreign currency), you need to declare that sum to the UAE customs office.

Cash Is King: An Abundance of ATMs

As far as payment options in the UAE are concerned, cash remains one of the most popular. In a 2015 survey conducted by Network International, the leading provider of payment solutions in the Middle East, cash turned out to be the preferred payment method for ten out of twelve purchases in the UAE. A spokesman from the company stated this was actually "a contrast to other global trade centers, where cashless transactions are far more prevalent".

If you urgently need some cash upon arrival, ATM withdrawal is the most obvious and easiest method. ATMs are numerous across the Emirates, especially in Abu Dhabi and Dubai. You can find them just about anywhere, not only outside of banks and at international airports, but also in shopping malls, larger supermarkets, and big hotels, even at many gas stations.

Before you leave for the UAE, you should, however, make sure that your ATM card works in the UAE. In most cases, this shouldn’t be a problem: common systems for ATM withdrawal include American Express, Cirrus, Global Access, Master Card, Plus System, and Visa.

However, your bank back home might charge you a transaction fee for every time you withdraw cash from an ATM in the UAE. Better find out beforehand how much that is!

Not Everywhere You Want to Be: Credit Card Usage in the Emirates

While traveler’s cheques have been in declining use for years now, major banks and global hotel chains in the UAE still offer the opportunity to cash them. Most expats will probably prefer simply using their own credit card: household names like Master Card, Visa, Diner’s Club, and American Express are widely accepted throughout the Emirates, whereas debit cards from abroad are a little less common.

Again, watch out for hidden fees from your credit card provider when using your card abroad! Moreover, if you are given the choice, never opt for "dynamic currency conversion" or "cardholder preferred currency" when paying by card. This method allows you to convert the purchase price into your home currency at the point of sale, but conversion rates are usually less competitive than those used by the credit card company. You’ll just end up paying more!

In small stores and restaurants, as well as for shopping in the souk, cash is the easiest — and sometimes only — payment option, though. Some small business owners may charge you an additional transaction fee of 5% if you insist on paying by card, and others may not have the technical equipment for processing debit or credit cards at all.

What about Online and Mobile Payments?

While e-commerce is just as popular in the UAE as anywhere else, online shopaholics should take note: the internet payment system PayPal is rather difficult to use in the Emirates. Only registered business owners can transfer money from their PayPal account to a local bank account, via a third-party provider, and dirham isn’t even available as a currency option on the site.

Last but not least, mobile payment via smartphone isn’t particularly widespread in the UAE yet. In a 2015 survey, only 4% of customers stated that they even purchased goods on a mobile device, let alone used any mobile payment methods.

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