Using A Credit Card

The credit cards that are provided by the commercial banks generally comprise of two options namely ‘cash’ and ‘budget’ transactions.

‘Cash transactions’ refer to such transactions which are interest free. For example, if the purchases are fully paid for within 30 days from the date of statement then the client does not pay any interest whatsoever. Thus if his total purchases for the month were R1000.00 then he pays R1000.00 to the bank which is free of interest. This option is permissible. ‘Budget transactions’ refer to such transactions whereby the client is unable to pay for his credit card purchases within the interest free period (which may be 30 days from statement or 55 days from date of purchase). The client therefore pays for his purchases over a period of six or twelve months. Such a transaction will attract interest as the banking institute has so to say loaned you that amount which is now being paid in installments over a period of time. Due to the impermissibility of paying interest in Shariah, such a transaction will be Haraam.

In conclusion, it is permissible to utilize a credit card on condition that one opts for interest free transactions (i.e. buying on the “straight” basis), and abstains from the “budget” basis of transacting.