The credit card in general is an unfamiliar system to the Islamic jurisprudence. It is impossible to categorize the credit card wholly under any of the well-known contracts in the Islamic jurisprudence -- this is because it constitutes a number of contracts which merge together to give such an unprecedented system. As a result of this, Islamic scholars could not reach unanimity on the question of the validity of the credit card in Islam.
Before illustrating the different opinions of the Islamic scholars, it is worth mentioning that the credit card is based on the idea of interest loans and interest is prohibited in Islam by a lot of Quranic verses and prophetic traditions such as the verse number 278 from Al Bakarah Sura which states the following (O ye who believe! Fear Allah, and give up what remains of your demand for usury, if ye are indeed believers).
However, most of the credit card issuers give the holder of the credit card a specific period after the credit day in which the holder can settle his debt without paying any interest; as what we illustrated previously in chapter two. Because of such a non-usurious granted period, the scholars could not reach an agreement regarding the validity of the credit card.
Some scholars validate the possession of such a card. They also validate using it to pay for purchases in stores. However, they provide that the holder must settle the credit amount to the issuer in the non-usurious granted period. In other words, the holder has to pay the amount he takes from the issuer before the latter starts calculating interest on this credit amount.
That mostly happens after the passing of 25 to 30 days from the date of crediting. And regarding the percentage which the issuer takes from the trader whenever the customer uses the credit card to pay for purchases, it is considered as a commission for the issuer and this is valid in Islam.
Nevertheless, those scholars prohibit the use of the credit card to withdraw money from the Automatic Transfer Machines. This is because the issuer does not give the holder a non-usurious granted period. In this case, the interests will be due even if the holder settles the money the same day. From this side is the American Sharia Scholars Assembly.
On the other hand, other scholars prohibit the possession of the credit card and its usage in any way even if the holder uses it to pay for purchases in commercial stores and settle this credit money to the issuer in the non-usurious granted period. They justify their opinion by illustrating that the mere acceptance to join in such a system is prohibited in Islam. This is deemed as a consent to being part of a usurious contract. From this side is the Permanent Committee of Fatwa.
In my point of view, the Permanent Committee of Fatwa’s opinion is worthy to be respected because usury is one of the grave offences in Islam. So Muslims have to avoid any transaction which contains interest stipulation even if they intend to pay in the non-usurious granted period.
The mere agreeing on joining such usurious system is regarded as an admission of transacting by interest and encouraging such a dealing. Moreover, a person cannot be always sure of being able to settle the credit amount during the non-interest granted period.
He may face some exceptional circumstances or sudden financial problems which prevent him to settle the debt in the mentioned period.
Second: The Islamic substitute of the credit card
Some Islamic banks found an alternative which is the Islamic credit card. In this system the bank issued an interest-free credit card which is based on the idea of deferred payment sale. In this case, the bank will conduct the transaction on its behalf and simultaneously sell it back to the user of the credit card at a higher price. This debt is paid over a deferred period.
It is worthwhile that the Islamic credit cards which are issued by some Islamic banks do not follow all the Islamic standards. They exploit this nomination for commercial purposes to attract consumers. Yet, good examples of the Islamic credit cards are the Visa Card which is issued by the Kuwaiti Financing House and the Visa Card issued by Al Rajhi Company for Banking Investment. Both of them are validated by the Islamic Institution of Fatwa and Supervision.
Many people insist on owning a credit card because it is considered as an immovable loan which the owner can move whenever he wants. It also enables him to face sudden financial problems such as interring a hospital or urgent traveling.
On the other hand, most investment experts advise to avoid using the credit card for many reasons. For one thing, the mere owning of such a card encourages its holder to purchase randomly. Furthermore, a lot of stores add to the price of goods an additional amount of money as a fee for using the credit card. That they get some of what they must pay for the bank from the customer. We should mention here that stores pay a fee to banks when a customer uses a credit card to pay for them.
It is obvious that one of the most significant reasons of the present universal financial crisis is dealing with usury which is facilitated by the credit card. Whereas the holder of this card can get big loans from banks provided that he settles them later. But he delays settling until the interest becomes so huge that he cannot settle. Consequently, many banks have lost a lot of their money forcing them to declare its bankruptcy.
Nevertheless, the credit card is one of the most profitable systems for the financial institutions. It’s amazing to know that the profit of the State of Qatar from the credit cards reached one billion Qatari Riyals in 2008.
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