The biggest point about credit cards is that you can get money when you need it. But at what cost? Well, interests, for one. Yes, you get charged a fee by the lender, which can be painful, but maybe not as painful as realizing there is a chance you could also be compromising your Islamic faith, especially for something like a credit card that is completely avoidable. 

This leads to the question, Are credit cards haram in Islam? 

In today’s update, we will be taking you on a journey to understand credit cards and whether they are considered forbidden in Islam. We will be quoting from the holy Quran while fielding the opinions of known Islamic scholars. 

Credit Card

A credit card is like a hidden chest of money, ready to be borrowed. The borrowed money must be repaid in full within an agreed-upon timeframe. If the cardholder doesn’t pay it back on time, an ‘interest’ fee is added. These cards are issued by banks and trusted financial institutions to eligible individuals. While they offer a convenient way to make purchases, it’s crucial to use them wisely and pay bills on time to avoid extra costs.

Trusted institutions like Barclaycard, Lloyds Bank, HSBC, and NatWest are a few of the financial institutions that issue credit cards in the United Kingdom. It’s important to note that each credit card issuer has its unique features, benefits, and eligibility requirements.

Are conventional credit cards Haram?

Conventional credit cards are considered haram because they charge interest, also known as riba in Islamic belief. The Holy Quran strictly forbids riba, and those who engage in usury (interest or riba) face severe consequences.

As stated in Quran chapter 2 verse 275: it is written that ‘Those who consume interest will stand ˹on Judgment Day˺ like those driven to madness by Satan’s touch. That is because they say, “Trade is no different than interest.” But Allah has permitted trading and forbidden interest. Whoever refrains—after having received warning from their Lord—may keep their previous gains, and their case is left to Allah. As for those who persist, it is they who will be the residents of the fire. They will be there forever.’

In contrast to the verdict above, some individuals believe that, under certain conditions, using credit cards may be acceptable in Islam. They consider credit cards to be a form of borrowing (qard), which is acceptable as long as there is no interest, which means people can use credit cards to make payments without borrowing money, but they must pay the full debt each month to avoid interest, according to this perspective. 

However, an Islamic public orator and founder of the Islamic Research Foundation, Dr Zakir Abdul Karim Naik, on Huda TV criticizes the opinion that some believe conventional credit cards can be acceptable in Islam as you pay off the entire balance each month to avoid interest. He said: 

‘The moment you take a credit card from conventional banks, you are signing a document saying that if you do not pay in time, you will pay riba (interest). Signing a document that says you will pay riba is haram.’ 

In simple terms, credit cards are considered haram because they involve interest. Entering into an agreement involving riba (interest) is prohibited, as it is firmly stated in the Quran that those who engage in such transactions will face consequences in the afterlife.

Halal Alternatives To Conventional Credit Cards

To harmonize our religious convictions with our financial transactions, it is paramount for Muslims to seek financial avenues that resonate with their faith. As such, we introduce the prospective Halal alternatives to credit cards.

Islamic Credit Cards

Sharia-compliant credit cards, offered by Islamic financial institutions, utilize a profit-loss sharing approach compliant with Islamic principles. This stands in contrast to conventional credit cards that involve interest. 

Islamic credit cards are like conventional ones, but they play by Islamic rules. They don’t involve interest, which is against Islamic law. Instead, they charge a “profit fee” if you don’t pay your balance in full every month. This fee is around 1.1% to 1.5% per month. If you pay on time, the fee is lower. If you miss payments, the fee goes up. You also need to pay at least 5% of your balance each month. If you don’t, the fee increases, and you may get a late payment penalty.

Here’s a crucial difference: Islamic credit cards don’t charge compound interest like conventional ones. The profit fee is straightforward and doesn’t pile interest upon interest, keeping your debt more manageable.

In the United Kingdom, top Islamic banks like Al Rayan Bank, Gatehouse Bank, UBL UK, Al Rayan Bank, and Arab National Bank provide these financial solutions, allowing you to harmonize your values with your financial decisions.

Debit Card

Debit cards are linked to a savings account at a bank or another financial institution. You can use the money in the account for purchases using your debit card, and you can also withdraw cash from ATMs without incurring interest charges.

Prepaid Card

They are commonly used for online shopping, budgeting, and as an alternative to carrying cash. They are available to a wide range of people, including those who do not have a traditional banking relationship, because they do not entail credit, interest, or a need for a bank account.

Conclusion

So, is credit card haram? We believe so based on Quran chapter 2 verse 275, which rules against any form of interest (riba) while clearly stating the consequences, further highlighting the significance of making financial choices that match your beliefs. Dr. Zakir Abdul Karim also shares similar views about obtaining credit cards from conventional banks. 

Thankfully, there are some halal alternatives to Islamic credit cards, conventional debit cards, and prepaid cards. With Islamic credit cards, there is no compound interest, letting you stay compliant with Islamic guidelines. And with debit cards and prepaid cards, you are spending only from your balance (you aren’t in danger of accumulating debt), completely ruling out any discussion about ‘interest.’ Exploring halal alternatives helps you make decisions that strike a balance between your financial activities and religious principles.