It’s important here to mention that I don’t think it’s permissible to make an unnecessary purchase with your credit card if you don’t have the money to cover your purchase even if you think you will have the money to pay it off before any interest accrues.
Muslims and credit cards: Balancing practicality and prohibition
Credit cards have become a common tool of modern economic activity. Naturally, because Muslims are prohibited from dealing with interest, dealing with credit cards is surrounded by many questions related to their permissibility. In this article, I will attempt to answer some of these questions.
I will start my analysis with an explanation of what a credit card is, why it is issued, and why it is used.
A credit card is a card that allows you to borrow money from a bank to make purchases. For the bank issuing the credit card, one of its primary motivations is the following: In return for lending the customer money, the bank charges the customer interest on the amount they borrowed. This means that the bank requires the customer to not only pay back the amount they borrowed, but also a percentage of the money they borrowed on top of what they borrowed.
For customers, there are a number of reasons why they may want to use a credit card to make a purchase:
1. To borrow money; perhaps the most obvious of reasons.
2. Security. If your credit card information is stolen it is much easier to get the credit card company to cancel any transactions the thief makes with your card than it is to recover cash that was stolen from your checking account had your debit card information been stolen.
3. Building credit. Having a credit card that you pay off regularly is a really useful tool for many people who don’t have credit and need to build up their credit score. For those who are unfamiliar, in the United States, a credit score is a measure that is often referenced in order to judge your financial health and tendency to pay your bills on time. Having a good credit score is necessary for many things including renting a home and even getting a job in some cases.
4. Universal Acceptance. If you visit a hotel or try to rent a car, at least in the United States, they are going to want to keep your credit card on file so they can charge you for any incidental expenses or damages you may cause. In most cases, they will not accept a debit card because this will require them to seek your approval before they can charge you.
Now that we know what a credit card is, why it is offered and why it is used, the question is: is it permissible for a Muslim to open a credit card?
To answer this question let’s remember the definition of Riba. Riba is defined as an increase in indebtedness, above principle, which is contractually required to be returned to the lender (to understand why we think this is the definition of prohibited riba in Islam, read my article: Islam’s view of debt and interest).
I should add, the prohibition of Riba in Islam isn’t limited to only the person charging interest:
The Prophet (peace be upon him) cursed the person who charges riba, pays it, writes its contract and the riba contract’s two witnesses and said they are the same.
لَعَنَ رَسُولُ اللهِ صَلَّى اللهُ عَلَيْهِ وَسَلَّمَ آكِلَ الرِّبَا، وَمُؤْكِلَهُ، وَكَاتِبَهُ ، وَشَاهِدَيْهِ ، وَقَالَ: هُمْ سَوَاءٌ
It is also important to understand that interest charged on debt fits the definition of Riba in Islam.
Accordingly, in a perfect world, opening a credit card, which requires one to sign a contract wherein they are agreeing to pay interest under certain circumstances, is Haram. Unfortunately, there are currently no Halal alternatives which can provide the advantages of credit cards, some of which are real necessities. So for instance, in the United States, it is rather difficult for me to book a hotel room or rent a car without a credit card.
Allah (SWT) says the Holy Quran (2:173):
إِنَّمَا حَرَّمَ عَلَيْكُمُ الْمَيْتَةَ وَالدَّمَ وَلَحْمَ الْخِنزِيرِ وَمَا أُهِلَّ بِهِ لِغَيْرِ اللَّهِ ۖ فَمَنِ اضْطُرَّ غَيْرَ بَاغٍ وَلَا عَادٍ فَلَا إِثْمَ عَلَيْهِ ۚ إِنَّ اللَّهَ غَفُورٌ رَّحِيمٌ
“He has forbidden you from consuming dead animals, blood, the flesh of swine, and that which has been dedicated to other than Allah. But whoever is forced [by necessity], neither desiring [it] nor transgressing [its limit], there is no sin upon him. Indeed, Allah is Forgiving and Merciful.”
The Holy Quran, Surat Al-Baqara, Verse 173
In short, Allah SWT is telling us in this verse that that which is prohibited can be consumed if the consumer is faced with a pressing need, has no alternatives, and only deals with the prohibited to the extent which removes his/her need but not more.
So for instance, if you are dying of hunger, and the only thing available for you to eat is pork, then it is permissible for you to eat that pork to prevent yourself from dying. However, you shouldn’t indulge yourself in this pork and eat until you’re full. Only eat enough to remove the necessity that forced you to consume pork in the first place.
Accordingly, before you open a credit card, ask yourself:
Do I have a pressing need and no alternative solutions which requires me to have a credit card?
If the answer is: No, you do not have a pressing need for a credit card, then you shouldn’t open a credit card; even if you have no intention of paying interest.
Absent a pressing need, opening a credit card with the intention of not paying any interest is analogous to walking into a casino with the intention of not gambling. The bottom line is that you are taking footsteps in the wrong direction and bringing yourself unnecessarily closer to doing that which is prohibited.
Allah SWT says in the Holy Quran (24:21):
یٰۤاَیُّہَا الَّذِیۡنَ اٰمَنُوۡا لَا تَتَّبِعُوۡا خُطُوٰتِ الشَّیۡطٰنِ ؕ وَ مَنۡ یَّتَّبِعۡ خُطُوٰتِ الشَّیۡطٰنِ فَاِنَّہٗ یَاۡمُرُ بِالۡفَحۡشَآءِ وَ الۡمُنۡکَرِ
“O you who believe, do not follow the footsteps of Satan. And whoever follows the footsteps of Satan – indeed, he orders immorality and wrongdoing…”
The Holy Quran, Surat Al-Nur, Verse 21
On the other hand, if the answer is: Yes, there exists a pressing need for you to have a credit card, then I think it is permissible under these certain circumstances to open a credit card.
However, we should not forget the Quran’s instruction that in these cases one should only use that which is prohibited to the extent which removes the necessity and not more.
Now the question becomes, when is it Ok to use a credit card?
In my opinion, I think it is permissible to use your credit card if you already have the money you need to make the purchase and you pay off your credit card immediately. By doing this, you will not pay any interest since banks typically allow customers a 25-30 day “grace period” before they charge interest.
It’s important here to mention that I don’t think it’s permissible to make an unnecessary purchase with your credit card if you don’t have the money to cover your purchase even if you think you will have the money to pay it off before any interest accrues. This is especially applicable for cards that offer 0% introductory rates for a set number of months after the customer opens their account.
If you’re surfing Amazon on Black Friday and you see a really good deal on headphones but you don’t have the money to pay for them, this is not a dire need! Do NOT buy those headphones with your credit card even if you think you will have the money to pay off those headphones before any interest is charged to you.
Life is unpredictable. Expenses can pile up quickly and your forecast of being able to pay off your debt in time may not materialize. Credit card companies prey on people who don’t have the discipline to wait until they have enough money to make the purchases they want. Don’t be one of these people! Don’t get caught in the debt trap! Remember, one of the motivations of credit card companies who offer 0% introductory rates is so people rack up large balances during this period which they are unable to pay off before the interest kicks in.
In summary: Before you open a credit card ask yourself:
Is having access to a credit card a necessity for me?
If the answer is “No” then don’t open a credit card.
If the answer is “Yes” then you can open a credit card but I want you to ask yourself the following question before each and every purchase you make:
Do I already have the money to pay for the item I am about to purchase?
If yes, then you can go ahead and make the purchase but make sure to pay off your credit card immediately. Most banks will allow you to set up automatic payment of your credit card balance so you never have to pay interest.
If you don’t already have the money, then don’t make the purchase!
I should add, if you find yourself lacking the required discipline to stick to the rules of credit card usage I mentioned, then you are probably better off not opening a credit card altogether. It is always better to play it safe when it comes to serious issues like these.