Credit Cards in Islam: Exploring Halal Guidelines & Rulings

Syed Bukhari

Updated on:

Are Credit Cards Haram or Halal?

Credit cards have become an integral part of modern financial life. However, many Muslims are uncertain if using credit cards is permissible according to Islamic principles. This article will analyze the Islamic stance on credit cards in detail.

What is a Credit Card?

A credit card allows the cardholder to make purchases or withdraw cash against a line of credit granted by the issuing bank. The bank pays the merchant and the cardholder has to repay the bank later. If the balance is not paid in full, interest starts accruing.

Most credit cards charge annual fees, cash advance fees, late fees, foreign transaction fees and have high interest rates (up to 25% or more). The interest compounds if the debt grows, trapping borrowers in a cycle of growing debt.

Are Credit Cards Haram In Islam

Core Islamic Principles

To determine if credit cards are halal or haram, we need to analyze them against two core Islamic financial principles:

Riba (Interest)

Charging interest (called riba) is strictly prohibited in Islam based on the Quran:

“Those who consume interest cannot stand (on the Day of Resurrection) except as one stands who is being beaten by Satan into insanity.” (Quran 2:275)

Paying or receiving interest is considered exploitative and unethical. Islam mandates finance be interest-free.

Gharar (Uncertainty)

Gharar refers to excessive uncertainty or ambiguity in contracts and transactions. Islam prohibits gharar because it leads to disputes and injustice.

Taking on debt without surety of repayment involves gharar and is disliked. Reckless spending beyond one’s means is also discouraged.

Analysis of Credit Cards Against These Principles

Let’s analyze credit cards against these core principles:

Involve Riba (Interest)

  • Credit cards have high interest rates up to 25% or more.
  • This interest accrues monthly if entire balance is not paid off.
  • Carrying a credit balance means paying riba.

Promote Reckless Spending

  • Credit cards make it easy to spend more than you have.
  • Can lead to accumulating interest-accruing credit card debt.
  • Taking on debt without certainty of repayment is gharar.

Support an Interest-Based System

  • Credit card business models rely on users not paying off balances.
  • Card companies earn money from interest payments.
  • By using cards, you enable riba even if avoiding it individually.

This analysis shows credit cards clearly violate the Islamic principles of avoiding riba and gharar.

Rulings of Islamic ScholarsCredit Cards

Based on the above analysis, most mainstream Islamic scholars have ruled conventional credit cards as haram:

  • Sheikh Taqi Usmani: Credit cards are an interest-based borrowing system developed by banks. Prohibited except in necessity.
  • Dr. Monzer Kahf: Permissible to own but not to borrow on. Should be paid off every month.
  • Sheikh Al-Qaradawi: Haram as they are a trick to legalize riba. Should not be used unless in pressing need.

While some scholars allow limited use in necessity, majority advise strongly against credit cards due to the riba and gharar they inherently promote.

Reasons Some Muslims Think Credit Cards are Halal

Despite mainstream scholarly opinion, some Muslims argue credit cards are halal for the following reasons:

Just a Payment Tool, Not Inherently Haram

  • Cards themselves are just a financial tool, not good or bad. It’s how you use them that matters.
  • If used properly, they provide convenience for shopping and build credit history.

Avoid Interest by Paying Off Every Month

  • If you pay statement balance in full each month, you avoid paying interest.
  • Many cards have an interest-free grace period for purchases.

Facilitate Essential Transactions Like Travel

  • Needed for airplane/hotel bookings and car rentals when travelling abroad.
  • Allows convenient online shopping for necessary items.

Provide Protections and Rewards

  • Get cashback, points and perks that save money if used responsibly.
  • Fraud protections can assist if something goes wrong with a purchase.

However, mainstream scholars find these reasons do not suffice to override the fundamental prohibition, as analyzed below:

Rebuttals of the Reasons for Credit Cards Permissibility

Just a Tool Argument

  • Even if a tool, inherently designed to charge riba which is haram. Cannot justify it.
  • Using it supports and enables wider credit system based on riba.

Pay Off Every Month Argument

  • While paying monthly avoids riba, the contract still stipulates you must pay interest if late. Signing such an agreement is impermissible.
  • You are taking on potential debt without certainty you can repay it riba-free. This is gharar.

Essential Transactions Argument

  • While travel becomes difficult, alternatives like prepaid debit cards exist. Necessity does not change prohibition.
  • Online shopping for essentials can be done without credit card using debit card or cash.

Protections and Rewards Argument

  • Fraud protections exist on prepaid cards and debit cards. Rewards are not justification for haram.
  • Lesser evil does not become halal if alternatives exist.

Hence, mainstream scholars assert that these reasons are insufficient grounds for permissibility.

Islamic Credit Card Alternatives

For Muslims wanting to avoid riba completely, some Shariah-compliant credit card options exist:

  • Offered by Islamic banks and halal fintech startups.
  • Charge no interest, only fixed fees. Require paying outstanding balance in full.
  • Transactions screened to avoid haram merchants.

While limited in scope currently, such Islamic credit cards allow enjoying the convenience of cards without engaging in riba.

Guidelines for Practical Use

Based on this analysis, here are some guidelines for Muslims on navigating credit card use in daily life:

  • Avoid credit cards if possible and use cash/debit cards instead. This is the ideal.
  • If forced to have a credit card for lack of alternatives (e.g. travel), use it minimally, only out of necessity.
  • Never take cash advances or withdrawals as it accrues direct interest.
  • Make sure to pay off entire statement balance before due date every month. Do not carry forward balances.
  • For large purchases that are difficult to pay off at once, take an Islamic financing facility without interest.
  • Support the development of Shariah-compliant Islamic credit cards and financing alternatives.

While use of credit cards is best avoided, these guidelines can help minimize harm if constrained by circumstances.

Can Muslims Work for Credit Card Companies?

If a Muslim works directly in promoting credit cards to customers for conventional banks, it involves facilitating and encouraging riba, which mainstream scholars prohibit:

  • Jobs in marketing credit cards and loans for interest-based banks would not be permissible.
  • Similarly, collection jobs where one forcibly takes interest-based repayments from defaulters would not be allowed.

However, there are some acceptable roles in credit card companies with conditions:

  • Technical and administrative jobs not directly interacting with credit card customers.
  • Development of Islamic credit card products that avoid riba.
  • Collection roles focused on recovering just the principal amount owed without interest.

Therefore, while direct selling of credit cards is not permissible, there are limited lawful opportunities available within the financial sector. Care must be taken regarding the exact nature and responsibilities of the job.

You should know ,IS LOTTERY HARAM IN ISLAM?

FAQs

Q: If I pay off my credit card balance in full every month, is it still haram to have one?

Even if you pay off the balance monthly, the underlying credit card contract stipulates you will pay interest if you delay payment in the future. Signing up for such an agreement which involves potential riba makes having a conventional credit card haram, even if you currently avoid the interest.

Q: Are credit card reward points halal to earn and use?

Most scholars opine that credit card rewards are haram as they incentivize spending on and increasing use of a prohibited financial product. If the means of earning is haram, the output is also tainted.

Q: Is it permissible to work for a credit card processing company handling transactions?

Directly facilitating and enabling an interest-based credit system would not be permissible. However, back-end technical roles that do not deal with customers may be permissible if the job itself does not involve recommending or marketing credit cards in any way.

Q: Can I pay zakat using my credit card to gain rewards?

It would be impermissible to intentionally pay zakat using a credit card to earn rewards, as gaining benefit through a haram contract is prohibited. Zakat must be paid sincerely from halalearning and savings.

Q: If I already have a credit card due to necessity, how can I transition out of it?

First step is to stop using the credit card altogether and pay off any outstanding balance in full. Then contact your bank to cancel the card once it is fully paid off. Replace it gradually with prepaid or Islamic cards to manage your expenses.

Conclusion

There is a strong mainstream scholarly consensus that conventional credit cards which stipulate interest on late repayments are haram due to involving riba. Some limited exceptions exist in cases of necessity, but they must be used with caution.

Muslims should avoid credit cards if possible, and support development of Shariah-compliant alternatives. If compelled to use them, following guidelines to prevent incurring interest is necessary.

Credit cards promote a culture of wanton consumerism, indebtness and instant gratification that goes against Islamic teachings. Being prudent and conscious with finances is a greater virtue that believers should aim for.