Question : A question was asked regarding [the validity of] using credit cards.

Fatwa in Brief: This [owning and using credit cards] is not permitted. Credit cards are the work of people who profit from usury, and devour the property of others.

The Permanent Committee, 13/524

Response:

It is permitted for a person to use a credit card when the total amount of money in his/her account is equal to, or exceeds that of the credit limit of the card and the amount of the purchases s/he wishes to make. It is not permitted to use credit cards, except under these conditions, and/or if interest is charged on the card.

Commentary:

In a contract between the two persons, a credit card is given by a bank to an ordinary person. This enables the credit card owner to purchase products or services, from places that approve the use of the card. The credit card user is not obligated to repay the price immediately; rather, the card guarantees the commitment of the original manufacturer (the bank) to repay this money. The payment is made from the monies of the bank. The bank then reclaims this money through installments from the credit card owner’s bank account. After a certain period of time elapses, some banks claim interest on the money outstanding, while others do not.

There are two types of credit cards: “covered” (al-mughata) and “uncovered” (ghayr al-mughata). A covered credit card refers to the card of an individual whose bank account contains an amount of money that is equal to, or more than, the credit card limit [thus this individual is never in debt to the card]. In contrast, an “uncovered” credit card refers to the card of someone who does not have sufficient money in his/her account to cover their purchases.

Rulings for credit cards:

1.  If the credit card belongs to an institution or company with a special committee[s] to monitor its work, then using this credit card is permitted. This is only the case, however, as long as this institution or company does not charge interest on the monies of their customers. In this case, if a customer is late in repaying the money s/he owes [on his card], the institution/company should stop his/her credit card from working until the payment of his debt is settled.

2.  It is permitted to use credit cards when these are “covered” [according to the above definition].

3.  It is not permitted to use “uncovered” credit cards [according to the above definition]. It is not permitted to use a credit card if interest is charged on the card; this holds even if the card owner intends to repay his/her debts in the period before interest is charged. Some scholars permit Muslims to use these [“uncovered”] cards when they live abroad on the grounds that it would be a hardship for them not to do so.[1] According to these scholars, Muslims living abroad must repay the amount they owe before the interest-free period elapses, so that they are not charged interest for late payment; thus, they avoid the sin of riba. Yet [in our opinion], there is no obvious difference between [the lifestyles of] those who live abroad and those living in Muslim countries [thus uncovered credit cards are to be avoided by all if interest is charged on them].

4.  It is permitted to use an uncovered credit card, if no interest is charged on the debts.

Dr. Anas Abu Shadi