Question

1.      I wanted to ask what is the ruling on credit cards? Are they permissible to use? Any conditions (for it to be halaal) regarding its use?

2.      What is the ruling on that loan which has an interest-free period for it? For example you take a loan from some X and if you pay let's say within 1 year there would be no interest but after 1 year you'll have to pay interest.

Answer:

Bismillāhi Taʿala,

Waʿlaikum Assalām Waraḥmatullāh,

1.      Please review recent answers on Best Buy Card and The Brick Card. The ruling for credit card is similar to these credit facilities except for the fact that credit cards normally give a grace period of only 25-28 days depending on the financiers.

2.      In principle, a loan which has an interest-free period or a grace period to pay out the loan will be permissible as long as one is confident to pay out the amount before the grace period finishes.

Merely entering such a loan agreement would not constitute engaging in an interest-based transaction. However, should the grace period finishes and interest kicks in, then the entire transaction will become interest-based and sinful.

It is our experience that those who engage in such facilities, are generally unable to uphold the grace period, and end up entering into an interest-based transaction. This is the obvious expectation of the credit facility as well. Hence, the discretion of confidence in paying out before the grace period is very sensitive. It should not be treated lightly.

Moreover, most of such facilities also come with clauses of minimum payment and other finer points. Any mistake(s) in these finer points changes such loan agreement into a regular interest based loan. Hence, one should know well before hand what is being agreed to.

Finally, this dispensation of using such facility is not the best course of action to start with. One should only look into these facilities if one is financially distressed, and is unable to fulfil the financial needs.  

Many people consider these responses as a general green light to tread into these credit facilities as though there is nothing to worry about. On the contrary, such facilities are extremely difficult issues since they bring one close to the possibility of falling prey to an interest-based transaction. If there are any ways of avoiding such loans, then one should adopt them, and only seek assistance from such loans if there is no way out. This is more cautious and rightful of one’s Imān.

Wallāhu Aʿlam,

Wassalamu ʿalaykum, 

Mufti Faisal al-Mahmudi
www.fatwa.ca