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Global عربي
Islamic credit cards play an important role in Islamic financial institutions and offer various services to cardholders in a Shariah-compliant manner.
Unlike conventional credit cards, Islamic credit cards avoid riba and other Shariah-impermissible elements. These cards are based on Wakalah and Tawarruq, both of which are Shariah-compliant contracts.
They allow users to purchase different items, access cash, and enjoy various benefits while ensuring adherence to ethical principles of Shariah and avoiding interest-bearing instruments. By offering these services, Islamic credit cards serve as a Shariah-compliant alternative to conventional credit cards.
Read more about: All You Need to Know About ISAs (Islamic Saving Accounts)
Islamic credit cards are defined as loan services provided by Islamic banks to cardholders in a Shariah-compliant manner. In simple terms, they offer a credit facility similar to conventional credit cards but in a Shariah-compliant and halal way.
The core difference between conventional and Islamic credit cards is that the conventional credit card is solely based on interest-bearing instruments, offering a revolving credit facility to the cardholder with interest.
Among the types of riba, Riba an-Nasiah exists in conventional credit cards, which is directly related to Riba al-Nasiah — a strict prohibition mentioned in Surah al-Baqarah (verses 275–281). These verses highlight the severity of engaging in riba:
“Those who take Riba (usury or interest) will not stand but as stands the one whom the demon has driven crazy by his touch. That is because they have said, ‘Sale is but like riba,’ while Allah has permitted sale and prohibited riba. So whoever receives an advice from his Lord and desists (from indulging in riba), then what has passed is allowed for him, and his matter is up to Allah. As for the ones who revert back, those are the people of Fire; they will remain there forever.”
On the other hand, Islamic credit cards are based on Shariah-permissible contracts such as Tawarruq and Wakalah (agency), which ensure that all transactions comply with Shariah principles.
The methodology of the Islamic credit card is as follows: when a client wishes to obtain an Islamic credit card, they approach an Islamic bank and request a Shariah-compliant credit facility.
Upon this request, the bank opens a savings account for the client, who then agrees to enter into a Musawamah agreement with the bank. Under this contract, the bank offers the client Islamic mutual fund units at an agreed deferred price.
Once the client becomes the owner of these units, he has already authorized the agent to sell the purchased units in the market and credit the sale proceeds into his account. The client can then utilize the credited funds and repay the utilized amount in installments or at different time intervals.
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1.1. Noor World Card
1.2. Noor Platinum Card
1.3. Noor Titanium Card
1.4. Noor Gold Card
1.5. Noor Velocity Card
1.6. Noor Flexi Card
2.1. Skywards Signature Credit Card
2.2. Skywards Infinite Credit Card
2.3. Emarati Credit Card
Islamic credit cards are based on Shariah principles and avoid all forms of transactions involving riba (interest), gharar (uncertainty), and maysir (gambling).
The contracts through which Islamic credit card facilities are offered are aligned with Shariah principles, and each contract carries its own distinct Shariah characteristics.
These characteristics are carefully considered and adhered to during the execution of the contracts to ensure full Shariah compliance.
Read more about: Riba Explained: Why It’s Forbidden and How It Differs from Trade?
From a Shariah perspective, it is not permissible for any institution to charge a late payment fee, as it is considered a form of interest (riba) on the principal amount.
However, some contemporary jurists hold the opinion that if a debtor delays payment without a valid reason, Islamic financial institutions may impose a penalty on the procrastinating debtor.
The amount collected from such penalties must not be treated as income but instead donated to a government-registered charity, ensuring Shariah compliance.
Read more about: Procrastinating Debtor in Islamic Finance
1- Are Islamic credit cards approved by Shariah boards?
Yes, Islamic credit cards are approved by the Shariah boards of an Islamic financial institutions. Their ongoing process is also oversight by the Shariah Compliance department and after the execution of the contract,
the Shariah Audit department review it according to the instructions of the Shariah supervisory board.
2- What fees are typically charged on Islamic credit cards?
According to the Noor credit card terms and conditions offered by the Faysal Islamic Bank, the bank earn the profit when it sells the mutual fund units the client on deferred Musawamah price. The bank may charge annual service fee from the client.
3- Is there a late payment penalty, and is it compliant?
If an Islamic credit card holder delays payment of an installment beyond the agreed time, the bank may impose a penalty on the client.
However, instead of treating the collected amount as profit, the Islamic bank allocates it to a government-authorized charity, ensuring compliance with Shariah principles.
4- Which banks offer Shariah-compliant credit cards?
4.1 United Arab Emirates (UAE)
- Emirates Islamic: Offers a range of Islamic banking solutions.
- ADCB Provides Shariah-compliant options, such as the Emirati Islamic Covered Card with cashback rewards.
- Dubai Islamic Bank Offers cards like the Prime Gold Card, which provides cashback on everyday expenses like telecom and groceries.
- RAKBANK: Provides Islamic credit cards with various benefits and rewards through its RAKislamic division.
- First Abu Dhabi Bank (FAB): Offers Islamic credit cards, including the Islamic Cashback Credit Card and FAB Emirati Islamic Credit Card.
4.2- Saudi Arabia (KSA)
- Al Rajhi Bank: A leading Islamic bank in the kingdom, offering a variety of Shariah-compliant credit cards, such as the Cashback Plus Platinum, based on the Murabaha structure.
- Riyad Bank: The bank's Islamic division offers a comprehensive portfolio of Shariah-compliant credit cards with extensive benefits.
- Alinma Bank: Specializes in Islamic banking and provides several compliant credit card options, including the Alfursan Platinum Credit Card.
- Bank Albilad: Offers the Shariah-compliant Tamkeen Plus Credit Card, among other products, with a Murabaha-based financing structure.
- Saudi National Bank (SNB): Provides cards that adhere to Shariah principles.
- Tasheel Finance: Offers Shariah-compliant credit cards that are approved by a Shariah board.
4.3- Other GCC countries
- Bahrain Islamic Bank (BisB): As the first Islamic bank in Bahrain, BisB offers a variety of Shariah-compliant cards with numerous features and rewards.
- Muzn Islamic Banking (Oman): Provides a range of Shariah-compliant credit cards, including gold, platinum, and signature tiers.
Disclamer:
This post is for educational purposes only, and does not constitute investment advice or a solicitation to take any financial action. It should not be relied upon when making investment or financing decisions.
