Journal Article

What Credit Cards May Or May Not Do An Economic And Sheriah Analysis

Iqbal, Munawar

2016

Overview

This paper presents an economic and Sharia analysis of credit cards, seeking to clarify what this instrument can legitimately offer and where it raises concerns. The author begins by discussing the economic functions of credit cards, highlighting their role in facilitating transactions, providing immediate liquidity, and enhancing market efficiency, while also cautioning against their tendency to promote excessive consumption and debt accumulation. The study then addresses the Sharia aspects, stressing that interest charged on outstanding balances constitutes riba, which is explicitly prohibited, while penalty fees and additional financing charges amount to exploitative practices. It notes that issuing banks rely heavily on such fees for profitability, creating a fundamental conflict between market practices and religious compliance. The paper suggests alternative models, such as fixed service charges unrelated to debt levels, prepaid card systems, or current account-linked debit cards to ensure direct settlement. It further explores the socio-economic impact of credit card use, pointing out risks of personal debt crises and household financial stress if cards are misused. Ultimately, the research concludes that credit cards are not inherently impermissible, but their conventional design and profit mechanisms render them problematic. With innovative Islamic alternatives and Sharia-compliant structures, they can become valuable tools that enhance economic activity while safeguarding ethical and religious principles. Abstract Written by Dar AlMandumh, 2025, Using AI

• Publisher: جامعة الملك عبدالعزيز - معهد الاقتصاد الإسلامي
• Subject: أجهزة الصراف الآلي / الأجهزة المصرفية / البطاقات الإئتمانية / التشريع الإسلامي / السياسة المالية / الفقه الإسلامي / النظام المالي / النظام المصرفي / مستخلصات الأبحاث