Are credit cards haram?

What actually decides it

The scholars do not rule on the plastic; they rule on the contract behind it. IslamWeb (fatwa 411622) puts the point plainly: the card is forbidden "so long as there is a condition obliging the payment of interest when instalments are delayed, because that is riba."

That is why your intention does not rescue the transaction. A person may be sure the salary will cover the balance and that no interest will ever fall due — the scholars still hold the contract forbidden, because entering a contract that stipulates riba is itself the prohibited act. IslamWeb states that the mere acceptance of the interest clause and signing it at the outset is haram, and that a resolve to avoid falling into it does not make it lawful.

Shaykh Ibn 'Uthaymeen (may Allah have mercy on him) made the same argument: the transaction is haram because it is a transaction undertaken on a commitment to riba — even if the person pays before the interest falls due, he has still entered upon that commitment.

The reasoning rests on the general principle that a Muslim may not assist in sin:

"And cooperate in righteousness and piety, but do not cooperate in sin and aggression."— Qur'an 5:2

And on the Prophet's ﷺ curse, reported in Sahih Muslim, upon the one who consumes riba, the one who pays it, the one who writes it and the two who witness it — he said they are all alike.

When a card is permitted

The International Islamic Fiqh Academy's resolution 108 (2/12) sets out the conditions, and the fatwas here build on it. A card is permissible when its terms contain no interest on the principal. Under that ruling:

• A flat fee is allowed: the issuer may charge a fixed fee at issue or renewal, as a real charge for services rendered.
• A merchant commission is allowed: the issuing bank may take a commission from the merchant on the cardholder's purchases, provided the merchant sells by card at the same price he sells for cash.
• Cash withdrawal is a loan: drawing cash against the card is a loan from the issuer, and is permissible if it carries no interest. A flat fee unconnected to the amount or duration of the loan is not interest; any charge beyond the actual service is haram.
• Gold, silver and currency may not be bought with an uncovered card, because those sales require hand-to-hand exchange in the same sitting.

The Academy was explicit that the prohibition applies even to someone who intends to settle within the interest-free period:

"It is not permissible to issue an uncovered credit card or to deal with it if it is stipulated with an interest increase, even if the applicant intends to repay within the free grace period."— International Islamic Fiqh Academy, resolution 108 (2/12)

The two kinds of card

The Academy also issued a separate resolution on covered cards (15th session, 1425 AH/2004 CE): issuing and using them is permitted if the terms do not include interest on late payment, and the same rules on fees, merchant discounts and cash withdrawal apply. It added that a cardholder may not be given haram privileges such as commercial insurance or access to places Islam forbids, though permissible benefits like priority service or price discounts are fine.

If you already hold one

IslamWeb (fatwa 44082) advises repentance for having dealt with an interest-bearing card, and notes that you are not bound to pay the interest — what you owe the bank is the capital, since a Muslim is obliged to honour agreements and avoid betrayal. What you bought with the card is yours; you owe the price of what you purchased.

Shaykh Ibn 'Uthaymeen gave a similar practical instruction: whoever used such a card and was the beneficiary should give the interest amount in charity with the intention of ridding himself of it; if he was the one wronged and the money was taken from him unjustly, his repentance alone suffices.

A note on the disagreement

Some have permitted dealing with an interest-bearing card on the basis that one will settle within the grace period. IslamWeb (fatwa 64435) rejects this outright, calling it an error, and advises the Muslim not to hunt out concessions and mistakes but to ask someone whose religion and knowledge he trusts. Shaykh al-Albani, in the material here, was asked about a card with a fixed annual fee and said he could not give a definitive ruling on the extra charge — whether it was riba or a fee for processing transactions — and so left the matter open, saying that if it is riba it is clearly haram, and if it is a fee for facilitating transactions it is permissible.

Key takeaways

• The card is not the issue; the interest clause is. A card with no riba condition is permissible, and one that stipulates interest on late payment is not.
• Your intention to pay on time does not make it lawful. Signing a contract that stipulates riba is itself the prohibited act.
• Flat fees and merchant commissions are permitted; a percentage charged on the amount owed is riba, whatever name it is given.
• If you already used an interest-bearing card, repent, return the capital, and — if you were the beneficiary of the interest — dispose of that amount in charity.
• Islamic banks issue cards structured without an interest clause; these are the ones the scholars describe as permissible.

Further reading

• International Islamic Fiqh Academy, resolution 108 on uncovered credit cards
• International Islamic Fiqh Academy, resolution on covered credit cards (15th session, 1425 AH)
• IslamWeb fatwas 411622, 64435 and 44082

And Allah knows best.