Saturday, December 09, 2006

Q&A: Are credit cards allowed?

The following is a draft translation from Arabic.

Question: Is it permissable to use Credit cards?

Answer:

Credit cards are of different types:

In one of its types, the card holder would have a certain amount of money in the bank that issues such card (debit card). The card holder would then make purchase by using the card such that he does not go beyond the amount of money he has in his account in the issuer bank, from participating trade shops that exist in several countries. The card holder would buy from these shops without making (direct) payments. He rather presents the card and sign bills by the value of his purchased goods/services. He then transfers the shop to receive the value of the purchased goods/services from his account in the bank that issued the card. In other words, the bank would pay to the shop the value of the purchased goods/services from the account of the purchaser that holds the card.

This type of card (debit card) is allowed. Its reality is that it is (a bill of exchange/promissory and representation(wakala)), where the purchaser transfers the trader to the bank that issued the card, and this bank, as an agent to the purchaser would pay the price of the goods/services to the trader from the account of the purchaser in the bank. That which the bank takes from the purchaser that holds the card, as a payment of the price of the goods/services, comes under the subject of the wage of agency (wakala).

However, what the holders of these cards do in terms of purchasing gold and silver without paying (immediately) the price, but they rather transfer the trader to the bank for receiving the price, this action is haram. This is because the immediate reciprocal possession of the gold/silver and its price is a condition for the validity of trading in gold and silver, otherwise it would be usury (riba).

This is the case of this type if the bank that issues the cards was a private establishment concluded through a valid contract by its signatories, or it was possessed by the government. In such case this type of cards is allowed.

The second type of cards is issued by the bank to its customers without them having an enough amount of money in their account that covers their purchased goods/services. In such a case, the card holder buys from the participating trade shops and signs papers by which the shop would receive the price from the bank that issued that card. The bank would record the amounts against the card holder in addition to some extra amounts, which the bank receives from the card holder in accordance of a plan of repayment through certain instalments. The reality of these cards is that they are guaranty (Daman) from the bank to the purchaser towards the trade shops. In other words, the bank guarantees the purchaser, while the trade shops sell to the card holder based on the guaranty of the bank. So, the bank that issues the card is the one that pays the value of the purchased goods/services. In other words, the card is a guaranty document from the bank, where the bank is (the guarantor), the purchaser that holds the card is (the guaranteed) and the trade shop is (the guaranteed for), while the value of the purchased goods/services is (the right due in the responsibility of the purchaser). However, this guaranty does not fulfil its legal conditions. This is because guaranty (Daman) in the sight of Islam is joining a responsibility to another responsibility for the sake of settling a right obliged on the second responsibility and without compensation (to the first responsibility). Thus, the guarantor pays off the right due in the responsibility of the guaranteed towards the guaranteed for without compensation (on the side of the guaranteed to the guarantor). However, the bank pays the value of the purchased goods/services in return of a financial amount. Therefore, this type of cards is not allowed legally from this angle. Moreover, the bank records the value of the purchased goods/services as debt upon the purchaser, and it receives this value with extra amount, i.e. as usury (riba). Thus, it is not allowed from this angle as well.

17 Jumada al-Akhira 1427
11/07/2006

20 comments:

Anonymous said...

Assalam-o-Alaikum,

To simplify my understanding please let me know if I got this right,

1) Debit cards are OK.

2) Credit card issued by any institution is OK as long as,
2a) The institution doesn't charge any fee for it (like annual fee)
2b) The payment is made in full when due thus not incurring any riba on it.

3) It is haram to purchase gold and/or silver via debit or credit card.

Abu Ismael al-Beirawi said...

Wa alaikum as-salam

Points 1 and 3 are correct. However point 2 is not. Credit cards are haram due to 2 reasons menioned in the Q&A. Basically because the type of contract is invalid, also it has a condition of accepting to pay interest (riba) if you go over the time limit of repaying which is not allowed to accept.

Anonymous said...

assalaam alaikum,

Question - would this mean that general credit agreements would aslo be void - by this I mean the 0% APR for 6months type deals.

hope the above is clear.

wasalaam alaikum

Abu Ismael al-Beirawi said...

Assalam wa alaikum

Yes the general credit agreements are prohibited to enter into if they include the payment of interest after a period of time, for example over 6 months. This is because to accept a condition of the payment of Riba (interest) which is related to the asl (root) of a contract such as in the case of credit or lending is prohibitted.

Wassalam

Anonymous said...

Talking to some folks, they say that CC contract is valid and any specific condition which states that singer of the contract has to pay interest in there is any delay in payment is invalid by the hadeeth of the Prophet (saw) in which He (saw) invalidated the additional conditions which were put on the slave for Ayesha (raa). Thus this specific interest condition does not nullify the contract and the condition itself becomes valueless.

Also, how about if one weeps, cries, and shouts to the CC company after late payment (for which they are charging interest and the company waives it.

Abu Ismael al-Beirawi said...

That view is not strong as it is permitted to ignore conditions which are not part of the root (asl) of the contract i.e. the branch (far) matters.

The credit card contract is a contract of lending and thus the condition of Riba is related to the root (asl) of the contract and thus is forbidden to enter it.

If we extend the view of those you mention, according to what you said it would then be halal to get a normal loan with riba but ignore the payment of the riba and only pay back the original sum which is haram of course. All the texts which forbid entering Riba contracts make this haram.

The question & answer posted above is according was verified by Sheikh Ata Abu al-Rashta and was also the view of Sheikh Abdul-Qadeem Zalloom (rh).

Anonymous said...

Just happened to browse through this particular article. Can you explain your above statement as to ignoring conditions which are not part of the root(asl)? Why can not invalid conditions be ignored according to above hadeeth? Other than saying some shaikh said so, can you provide a stronger daleel as to why the contract that was invaldiated by the rasool(saw) as mentioned above cant be taken as a stronger daleel?
Essentially then those who sign agreements during citizenship test in any non muslim country would be agreeing to abide by the Kufr laws?

Islamic Revival said...

The issue is related to Manat al-hukm (the reality of the rule). What is mentioned in the hadith doesn't match the reality of entering into forbidden contracts that have been forbidden by clear text from the basis such as Riba based loans - if it were the case that you could ignore any invalid portion of ANY contract that would contradict direct text forbidding these types of contracts which are forbidden explicitly by text, such as:

Jabir narrated, “The Prophet (saw) cursed the receiver and the payer of interest, the one who records it and the one who witnesses it and he said, ‘They are all alike’ .” (from Muslim, Tirmidhi and Ahmad)

Anonymous said...

Assalam alaikum,
I thought this over and wanted more clarification and am not seeking an argument.

It seems to me that two actions are being talked about here.

One where a person is performing the action of entering into a contract which has a condition of paying Riba in it.

The other action that is being talked about is the actual payment of Riba i.e. when the person performs the action of receiving or paying Riba.

Please let me know if the hadeeth that you quoted refers to the actual action of paying Riba and the actual action of recording the payment of Riba? How does this then relate to the action of entering into an agreement?

The other hadeeth of the Rasool(saw) invalidating the additional conditions which were put on the slave for Ayesha (raa)
talks about entering into a contract.

Please can you outline the exact process that you are using to derive the hukm.

Islamic Revival said...

Assalam wa alaikum

Of course we realise that you are asking sincerely for the sake of clarity as a Muslim should, we do not think otherwise.

1) The mafhum (implied meaning) of the hadith includes entering the agreement of Riba. Recording the Riba has been forbidden which is not entering into the agreement, it is just recording like an accountant does, then how would entering into the agreement of paying Riba be allowed?

2) It is not correct to quote the hadith about the conditions and use it to absolve us from following any conditions in contracts. As there are also many other texts on the subject, for example:

From Hakeem bin Hazam who said: “I said: O Messenger of Allah, there comes to me a man asking me to sell what I do not have to sell then I buy if from the market. He said: Do not sell what you do not have” (narrated by Ahmad).

from Amru bin Shuaib from his father from his grandfather who said: The Messenger of Allah (SAW) said: “It is not allowed to borrow and sell, nor two conditions in one sale, nor a profit that is not included nor the sale of what you do not have” (narrated by Abu Dawud)

Abu Dawud narrated that the Messenger of Allah (SAW) said: “Whoever sells two sales in a sale, for him is the lesser (awkis) of the two or (it is) riba” its meaning is where there occurs two sales in one good like where one sells a good for a price for a period, then when the period arrives with non-payment of the price seller defers the price for another period increasing the named price i.e. considering the good’s price as a bargaining (azeed) price for another period so he would have sold two sales in one good. Or he sold him the good for a specific price so the buyer buys the good then he seeks delaying paying the price to a specific period. So the buyer accepts, then he sells him the good another sale for a higher price for a named period i.e. the price is increased and the period deferred.

Anonymous said...

Walaikum assalam,
I do not know arabic however the english translations that I have seen so far on the internet described the person recording as a scribe for the agreement. Is it so in arabic?

This hadeeth came up in one of the discussions with a brother and the implied meaning of the hadeeth is not taken and the hadeeth is taken as exactly as it is. So how to differentiate and know the meaning of this hadeeth if different people take it differently.

I understand the other point that you are making regarding contracts which may have different realities and have different hukms.

Anonymous said...

salaam ,
i was reading a book regarding fiqh by imran nyazee which ofcourse was in english.. it seems that abu hanifah made the ijtihaad that if the contract contained condition of riba then the contract is fasid and not batil, since removal of the condition of riba would make it valid again..

are you aware how abu hanifa derived the hukm? because the hadeeth that you quoted regarding selling is based on making two sales or not selling one that a person does not have. And the other hadeeth is using the aql(mind) to derive the implied meaning. Is that allowed or should a text be used to understand it?

Islamic Revival said...

AA

1) It is haram to knowingly enter a fasid contract, for example you cannot knowingly enter a marriage contract without two witnesses - however if you do it you are sinful but the contract is fasid i.e. you are still married but you need to correct it by getting the correct number of witnesses.

Therefore knowingly entering into the a contract such as a credit card one would be haram.

Regarding the exract process Abu Hanifah used to extract this I am not sure of it.

2) Regarding Mafhum, it is not correct to say it is derived from the Aql, it is about understanding the meaning of the text like other subjects such as illah (reason), majazi (methaporical) or haqiqi (literal meaning), etc.

You can read further about Mafhum & Mantuq in the following article:

http://abuismael.blogspot.com/2006/07/mantuq-mafhoum.html

Anonymous said...

wassalam,
I am just quoting the following from the book by Nyazee:

When an act prohibited for itself becomes the subject matter of a contract, the contract is void(baatil), that is it will have no legal effects.As compared to this, when the act prohibited for an external factor becomes the subject of a contract, it is not void(baatil), but is valid or is vitiated(fasid) with partial or suspended legal effects, according to the varying opinions of jurists on this. Thus, if the sale pertains to carrion or to wine, the contract is void having no legal effects. Likewise a contract of marriage within the prohibited degree is void(baatil) and has no legal effects. As for the contract of riba mentioned above, it is unenforcable(fasid).

Question : I am not sure what the different madhabs(Shafi, hanafi, hanbali, maliki) have said on the sale of riba based conditions? If you know of any of these four then it would help in identifying whether credit cards which has riba based conditions are allowed or not? Then similar question is raised whether Bank accounts opened after signing contracts are valid or not? The hukm that you had stated regarding that it is not allowed about credit cards, is it from a mujtahid?

Islamic Revival said...

In what you quoted it doesn't discuss the issue of sin, it simply discusses the difference between batil and fasid in the sense of enforcement. For example if someone claims to be married but the contract is Batil, then the marriage has not taken place and it is considered Zina for them to be together. However if the contract was fasid then they are married but the contract must be corrected - so for them to stay together is not Zina.

The issue of credit cards is a new reality, it is possible that there may be difference of opinion amongst Mujtahideen regarding it. The question & answer I posted was verified was verified by Mujtahideen such as Sheikh Ata Abu al-Rashta and was also the view of Sheikh Abdul-Qadeem Zalloom (rh).

Anonymous said...

I would prefer the opinion of sheikh taqiuddin nabbhani together with the opinions of the four madhabs if you are aware on the subject of signing of contracts with riba conditions mentioned in it, be they credit cards or opening a bank account.

One thing that I did notice while browsing through the topics is the lack of comparison between different opinions held by different madhabs. Therefore, certainly it would help the muslims in the ummah to know about the different opinions and follow the hukm.

Anonymous said...

assalam alaikum,
i was just wondering if the following reality has been considered while deriving the hukm.
There is a credit card issuing bank, the cardholder from the issuing bank, a merchant(shop owner) who operates a merchant terminal from a different/same bank and the acquirer(bank on whose POS terminal the transaction takes place) of the card during transactions. The shop owner has an agreement with the merchant bank(could be different from the cardholder's bank) that whatever transaction happens on the terminal would be collected by the bank who provided the POS terminal. On top of that the merchant receives some extra cash as commission which is not charged from the Cardholder as an extra amount for POS transactions.

The Acquirer Bank contacts the Issuer Bank(Cardholder's bank) to tell the Issuer Bank that a transaction has taken place. This usually happens through a central processor(VISA/Mastercard). The processor gives the issuer bank money from the transaction amount and keeps some for the processor and gives some to the acquirer. The money comes from the original amount and the shopowner receives less i.e. from 100 units shopowner receives 97 rest is split amongst three.
So the issue of daman where does it come for the Cardholder?

Anonymous said...

Just to correct one thing of the above. merchant does not receive extra cash as commission.. rather merchant loses out on the transaction as the original amount of 100 units is not received by merchant/shop owner and receives 97 units. The three units is split amongst acquirer bank(who gave the POS terminal), issuer bank(the cardholder's bank) and processor(VISA).

Abu Radiya said...

As-salamu 'alaikum. If I could ask a new question on this old topic of discussion. In the first case (Debit Card), the Bank also deducts some portion from the value of the purchased goods while settling the bill to the Seller/Trader. Will such deductions impair the validity of the transaction of any concerned party?
Wa-assalam,Your brother
Abu Radiya

Anonymous said...

Assalamu alaikum, having recently read the article, just wanted clarifications:

1) Does same rule apply to other categories as it does to gold and silver.
ie does buying salt, or wheat, or barley with debit card, does it have to be hand in hand.


2) Does rule of exchanging gold for gold, silver for silver apply to all ptiducts exchanged. even the products that are not mentioned in the hadith.ie exchanging bread for bread, or even pen for pen, I hope you understand what I am trying to ascertain and I am not trying to be difficult.

3) Is there articles on fiqh of Money that may be relevant for todays reality.


4) When it comes to cash that are sent abroad,how can you make transactions riba free, as they hold money for 3 or 4 days before it goes into the account and obtain interest from it.


5) Any other rules regarding Money