Fatwa ID: 07117

 

Answered by: Maulana Muhammad Altaf Hossen

                  

Question:

 

I have a question – when credit cards have instalment plans that are zero percent interest but have a fixed monthly fee is that permissible

 

 

In the name of Allah, the Most Gracious, the Most Merciful

 

Answer:

 

In Islamic finance, charging or paying interest is prohibited (Haram). However, the issue of zero (%) percent interest instalment plans with fixed monthly fees is a bit nuanced and subject to interpretation.

 

Firstly:  The meaning of zero (%) percent: The monthly payment on a credit card is the minimum payment a cardholder must make to avoid their card payments from being past due. It is typically calculated on the statement total, usually a percentage of the balance. It could include past due amounts and late fees, as well. It will vary on the provider.

 

The factors and rules:

 

1. Nature of the fees: If the fixed monthly fee is considered a service fee or a fee for facilitating the instalment plan rather than interest. (1) Islamic finance principles allow for fees to cover administrative costs or services rendered. it would be permissible.
2. Intent and Substance: Islamic finance emphasises the avoidance of Riba in both form and substance. Therefore, it would not be permissible if the zero percent interest instalment plan is essentially a disguised form of interest.

 

Islamic finance priorities transparency and fairness in transactions. All terms and conditions must be disclosed to the customer, and there should be no hidden charges or deceptive practices. After that Zero % and monthly fees credit cards are permissible,

 

 

 

Only Allah (عز و جل) knows best

Written by Maulana Muhammad Altaf Hossen.

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

 

 

 

 

 

Reference (1) : (1) It is precisely this kind of transaction ( credit cards  ) that the Quran expressly prohibits.

 

يَا أَيُّهَا الَّذِينَ آمَنُواْ اتَّقُواْ اللّهَ وَذَرُواْ مَا بَقِيَ مِنَ الرِّبَا إِن كُنتُم مُّؤْمِنِينَ

 

فَإِن لَّمْ تَفْعَلُواْ فَأْذَنُواْ بِحَرْبٍ مِّنَ اللّهِ وَرَسُولِهِ وَإِن تُبْتُمْ فَلَكُمْ رُؤُوسُ أَمْوَالِكُمْ لاَ تَظْلِمُونَ وَلاَ تُظْلَمُونَ

 

O you who believe! Observe your duty to Allah and give up what remains (due to you) from usury, if you are true believers.