Understanding Islamic Finance - Doha Academy of Tertiary Studies

380 Understanding Islamic Financereimbursed for any payments, irrespective of the relationship between the card holder andthe party accepting the card for payment.The most important of the above cards are credit cards, which provide revolving credit,emergency buying power, worldwide payments through a single instrument and financialsecurity. The Jeddah-based OIC Fiqh Council has defined the credit card as follows:“A credit card is a document that a bank issues to a natural or legal person according to a contractbetween them. The card holder purchases goods or services from those who accept the card withoutimmediate payment of the price. Payment is made from the account of the bank, who, afterwards,charges the card holder at regular time intervals depending upon the terms of the contract and thesituation”.Sharī´ah Position on Various CardsThe Islamic Fiqh Council, in its twelfth session (23–28th September, 2000) resolved that:“It is not permissible to issue a credit card or use it if its conditions include imposition of interest.This is so even if the card holder has the intention to pay (the price) within the moratorium periodthat precedes imposition of interest. However, it is permissible to issue credit cards that do not carrya condition of imposing interest on the credit. The bank can take from the card holder a specificamount of money at the time of issuing or renewal of the card as fee that the issuer deservesaccording to the services it provides to the card holder and any charge over and above this fixedamount is impermissible because of being usurious. It is also permissible for the bank to take acommission from the merchant on the goods or services purchased by the card holder, providedthat such goods or services are sold at the same price, whether in cash or credit”.This, therefore, implies that charging an initial membership or periodic fee on credit cardsdoes not pose any Sharī´ah problem. However, financing through credit cards on the basisof interest is prohibited. Thus, Islamic credit cards can take the form of “charge cards”,where charges for the issuance of the card and recurring annual charges can be recoveredfrom the card holders, and transaction charges and commission can be recovered from themerchants. However, if a loan or debt is created, no return can be charged thereon from thecard holders.A debit card can be issued and used as long as the card holder does not exceed the balanceavailable in his account; no interest charge arises out of the transaction. Charge cards canalso be issued subject to the following conditions:1. The card holder is not obliged to pay interest in the case of delay in paying the dueamount.2. If the cardholder is required to deposit a sum of money as a guarantee and this amountis not available for use by the card holder, then the issuing institution should invest it forthe benefit of the card holder on the basis of Mudarabah; any profit accruing on it shouldbe shared by the card holder and the institution according to the specified ratio.3. The institution must stipulate and ensure that the card holder will not use the card forpurposes prohibited by the Sharī´ah.4. It is permissible to purchase gold, silver or currency with a debit card or a charge card incases where the issuing bank is able to settle the amount due to the party accepting thecard without any credit period.An Islamic bank or institution is not permitted to issue credit cards that provide aninterest-bearing revolving credit facility, whereby the card holder pays interest for being