Question :
We know credit cards are OK to use in general(if paid on time) but what about these ones available at, for example, The Brick:
These are different than regular credit cards in that they can only be used to buy furniture and lack other features like balance transfers, cash-backs/withdrawals, expiry date, security PIN etc.
So, they are limited in what they can be used for but allow a no-interest grace period like regular credit cards.
Do you know if it is permissible to use these (if paid before interest accrues)?
Answer:
Bismillahi Ta’ala,
Assalamu Alaikum Warahmatullah,
After having a look at the credit card in question, it seems that its structure does not essentially differ from nominal credit card.
This particular card offers an interest free grace period of 18 months. If the amount is not paid in this promotion period, the bank offering this credit will start charging 29.9% interest, with minimum monthly payment of 3.5% towards the owing amounts.
Along with this the card also charges the consumer for a “merchant fee”, which the seller normally charges the consumer either by inflating the price, or by directly charging his account. This fee generally covers interchange discounts, transactional costs and fraud protections etc.
The Merchant Fee is a direct result of the costs, expenses and features which the merchant’s bank offers in order to finance this amount. It is in lieu of these features, they charge the merchant who then transfers it over to the client. Hence this fee is not regarded as an interest charge (riba).
In light of this, regardless of the usage restrictions, it will be permissible to utilize these financing credits as long as one is always careful that he pays the bills within the stipulated time without fail. Should he not fulfil this payment, and accrues interest, then his entire transaction will be deemed an interest based transaction and sinful. (i)
Wallahu A’lam,
Mufti Faisal al Mahmudi
www.fatwa.ca
(i)
The merchant discount fee covers a number of things, such as terminal rentals, fraud protection and transaction slips. But the biggest component of it is based on the interchange rate, which is set by the credit card companies… The credit card companies don’t receive any revenue directly from interchange rates. Instead they make their money by charging the banks fees for networks, transactions and other kinds of services.
http://www.thestar.com/business/personal_finance/2013/07/23/how_credit_card_fees_for_merchants_work.html (accessed 4th Oct 2014)
A number of different fees fall within the umbrella of merchant fees. When someone opens up a merchant account, an application fee must generally be paid. In addition to this, the merchant will need to pay an annual fee to maintain the account. Every time a credit card is run, the merchant is charged what is known as an interchange fee, the fee for the merchant’s bank to communicate with the issuer of the credit card to authorize the transaction and get the money. Additionally, the merchant’s bank charges a processing fee for each credit card transaction. http://www.wisegeek.com/what-are-merchant-fees.htm (accessed 4th Oct 2014)