In the Name of Allāh,

the Entirely Merciful, the Especially Merciful

Praise is due to Allāh, Lord of the worlds, may the blessings and peace be upon our master Muḥammad, the last of prophets, on his family, and all his companions.

Resolution No. 108 (2/12) Unsecured Credit Cards

The Council of the International Islamic Fiqh Academy of the Organization of the Islamic Conference, holding its 12th session in Riyadh, Kingdom of Saudi Arabia, on 25 Jumādā al-Ākhirah – 1 Rajab 1421h (23–28 September 2000),

Based on the Academy resolution no. 63 (1/7) concerning Financial Markets, which resolved to postpone adopting a resolution on the Shariah characteriza- tion of this type of cards to the next session of the Academy,

In reference to the Academy resolution no. 96 (4/10),

Having examined the research papers submitted to the Academy concern- ing Credit Cards,

Having listened to the discussions of Fiqh scholars and economists on the subject,

Having recalled the Academy resolution no. 63 (1/7), which defined the credit card as follows:

The credit card is a document given by its issuer to a natural or a legal person on the basis of a contract between them enabling the second party to buy goods or services from a vendor who approves the document, without paying the price immediately as the document includes the issuer’s commitment to pay. Payment is made from the account of the issuer who will afterwards charge the cardholder at regular time intervals. Some issuers used to impose usurious interest on the total outstanding balance that the cardholders owe to them, after due date of payment, while other do not.

Resolves

First: It is not permissible to issue unsecured credit cards or use them if their terms involve the imposition of usurious interest. This is so even if the card- holder intends to pay within the moratorium period before charging interest.

Second: It is permissible to issue unsecured credit cards that do not have a condition to charge interest on the debt. Permissibility of this transaction en- tails two further considerations:

1. The card issuer is permitted to charge from the cardholder a specific fee at the time of issuing or renewing the Such amount constitutes the actual fee that the issuer deserves according to the services it provides to the cardholder.
2. The issuing bank is permitted to charge a commission on the trader’s goods or services purchased by the cardholder, provided that such goods or services are sold at the same price whether in cash or credit.

Third: Cash withdrawal is considered a loan from the card issuer and is therefore not objectionable under Shariah if it does not involve a usurious in- terest. The service charge for withdrawal is not considered usurious because it is not associated with the loan amount or its duration in exchange for this service. However, any other charge over the actual services is prohibited for being Ribā, which is prohibited by Shariah according to the Academy’s two resolu-

tions no. 10 (10/2) and no. 13 (1/3).

Fourth: Unsecured credit cards are not permissible for the purchase of gold, silver, and currencies.

Indeed, Allāh is All-Knowing.