Basically my question is in the title field, my question stems from this comment:
It deserves mention that not all credit card services are haram, it depends. – Tamer Shlash, Jul 29 '12 at 20:30
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2 Answers
Credit cards are similar to loans from a merchant to a seller, when you use a credit card you charge the bank you received the card from, and then they bill you later. The only way that the bank makes money is if you miss a payment.
18) Grace Period. You can avoid interest on any portion of a Purchase shown on your current billing statement that you pay by the Payment Due Date if the New Balance shown on your previous billing statement was zero or was paid in full by the previous Payment Due Date. The Payment Due Date will be at least 25 days from the statement closing date and is printed on each billing statement you receive. You cannot avoid interest on Cash Advances or balance transfers.
If you pay the bank its due at the end of each month there is no excess charge to you, but if you miss a payment, they begin charging interest to encourage you to pay already, otherwise you pay the amount that you would normally owe.
So in conclusion if you don’t miss any payments, you won't be charged interest, and it wouldn’t be haram. Unless of course as stated above, certain credit card companies wont let you avoid paying interest on cash advances or balance transfers. They would simply be giving you a loan for a short amount of time then you will pay it back. But if you miss a payment (which is very easy to accomplish) they begin charging interest. So it would be best to stay away from these types of cards unless you absolutely trust yourself to pay on time.
If you dont feel that you can trust yourself to always pay on time, or feel it it best to stay away from something that may lead you to haram, you may want to use a debit card. This is a pre paid card, you connect the card to your bank account, and the seller withdraws money directly from your bank account, without you being required to make a payment, it also has a set limit on how much you can spend a day, and they alert you if suspicious buying habits begin. And its completely void of interest.
sources: Wells Fargo contract agreement rules
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1It is not correct that banks only make money from missing payments. All credit card banks takes a fixed amount from any payment you do. For example, Visa takes around 2.5% from the merchant when you pay by Visa. Missing payment is treated like unpaid-interest-loan.– YousfJul 30, 2012 at 10:00
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1many credit cards also earn profit by charging a flat annual fee (not interest)– goldPseudo ♦Jul 31, 2012 at 17:09
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This answer is just wrong. The only way to avoid interest is to pay off your balance in full every month. This is quite different from not missing a payment. If you make every payment as scheduled, It is quite common that paying every payment on time will still result in paying over 100% in interest over the life of a loan.– FlimzyJul 31, 2012 at 20:16
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that is what i mean if you dont miss a payment its obvious your paying the amount that its asking you to pay– NesreenAJul 31, 2012 at 21:17
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Paying the amount you're asked to pay will not avoid interest charges. It will only avoid late-payment charges.– FlimzyAug 1, 2012 at 2:27
[The] bank buys the product in the moment the card goes through. Then it sells the product to the customer at a higher price (costs plus x) and buys it back again at cost price. So the bank made a profit from the difference of prices.
Sometimes they make money from transactional fees, though very little. There are also similar models as mentioned on the quoted article.
They're making money on the convenience of letting you pay your debt over longer periods of time, instead of on the spot. While riba encourages you to borrow a lot of money and keep you in debt for more profit, Islamic credit cards will want you to pay off that debt by a set amount of time.
