The Council of the International Islamic Fiqh Academy, an offshoot of the Organization of the Islamic Conference (OIC), in its 15th session in Muscat, Oman, held from 14-19 Muharram 1425AH (corresponding to 6-11 March 2004), has perused the research papers presented to the Council with regard to credit cards and has listened to the discussions that revolved around it. It has also reviewed the past resolutions issued by the Council on this topic: Resolution No. 63 (7/6), which includes the definition of credit cards and their types, and Resolution no. 108 (12/2), which clarifies the Shari‘ah ruling on issuing credit cards that are not backed by an underlying account; on using such cards; the fees connected to them; the commission that merchants and service providers who accept the cards are charged [on each transaction]; cash withdrawals; and use of a credit card to buy gold or silver or currencies. After all that, the Council has resolved the following:
- It is permissible to issue and to use a credit or debit card that has an underlying account, i.e. the amount of any purchases is deducted from the cardholder’s bank account, on the condition that if there is a delay in settlement, the cardholder will not be charged interest;
- Resolution no. 108 (12/2), which concerns fees, deductions from [what] sellers and service providers [charge], and cash withdrawals, is applicable to cards that have an underlying account, with the parameters mentioned therein;
- It is permissible to buy gold or silver or currencies with cards that have an underlying account;
- It is not permissible for financial institutions to grant cardholders prohibited privileges, such as conventional insurance coverage or access to places of vice or places which are not in line with the Shari‘ah. However, financial institutions are allowed to grant privileges that are not prohibited by the Shari‘ah, e.g. priority in getting services or getting discounts at certain places.
- It is incumbent upon the Islamic financial institutions that are providing alternatives to unbacked credit cards to observe the rules of the Shari‘ah in the issuance of the cards and their terms and conditions. They should abstain from issues that are hard to distinguish from riba or that lead to riba, such as replacement of one debt with another [larger] debt.