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Fatwa CenterTaking a fine on delayed credit card payments
Question
ASSALAAM AALEKUM, In Dubai there are several islamic banks governed by their respective shareeah departments. All islamic banks issue islamic credit cards. One such islamic bank issues an islamic credit card which if used, regardless of the amount used, charges a fixed 50 Dirham administration fee on a monthly basis till the amount used through the islamic credit card is paid back in installments of 10% per month. Is this fixed 50 Dirham, charged by the islamic bank as administration fee, known as riba or is this halaal and cannot be considered as riba? I request you to explain this in light of evidences from The Holy Quran and Authentic Hadeeths. Secondly - According to the islamic bank, many customers try to deliberately delay installment payments thinking that an islamic bank is not going to penalise them for the delayed payment because of which their shareeah department came up with a solution of taking a penalty amount from defaulters and giving that amount in charity. Is this penalty amount taken riba or is it also halaal and acceptable as per the above conditions. I request you to explain this also in light of evidences from The Holy Quran and Authentic Hadeeths. JAAZAAKALLAH KHAIR
Answer
All Perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger. We ask Allaah to exalt his mention as that of his family and all his companions.
We have already issued a Fatwa about the ruling of credit cards. We mentioned that it is allowed for banks to take fixed administrational charges against their services, which do not change based on the withdrawn amount. See the details in Fatwa 84519.
As for taking a fine on delayed payments, it is forbidden as it is clear Ribaa (interest and/or usury). The excuse of the banks that they will spend this amount in charity does not justify their practice. Any loan that avails benefit is Ribaa. Signing the contract of a credit card is not allowed if it contains paying a fine on delayed payments.
The lawful way to secure the right of lender is asking mortgage or a guarantor.
Allaah Knows best.
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