September 24th 2013

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With fifteen per cent of the population of Singapore declaring themselves to be of the Muslim religion in the last census, it makes financial sense for the major banks on the island to ask themselves how best to deal with this important sector of the economy.

 

Islam declares usury (the borrowing and lending money for interest) to be haraam – forbidden. As this is one of the major planks of banking and credit card lending one would think that it would make it impossible for a believer to hold a credit card.

However, the banking sector is not so easily put off, and the major lenders, in association with Islamic scholars and leaders, have come to arrangements where lending in declared halal under certain strict rules. This is where the world of Islamic Lending has emerged, along with the first halal mortgages and halal credit cards.

 

Usury is a problem to Muslim credit card holders because credit cards charge interest on outstanding balances. Therefore, devout Muslims Have had to avoid the use of credit cards entirely, or take a minor risk in applying for a “normal” credit card and pay off the balance in full each month.

Halal credit cards, which are appearing in markets around the world where there is a significant demand, shun interest charges altogether and thus remove the obstacle that makes them haraam. Instead, some cards pay an agreed monthly fee with pays for the operation of the account. Interest is never charged.

 

Other cards operate much like pre-paid credit cards, or bank debit cards. There is no monthly charge, and the card can only be used if it is in credit. The user gets all the benefits and convenience that comes with being a credit card owner, but none of the religious complications that come with being the subject of a loan. One USA-based Halal-approved credit card even comes with a reward points system, allowing members to work towards earning flight miles. Other give their profits to sharia-friendly charities.

The cards have been met with both enthusiasm by potential customers, especially those who realise how important plastic is when travelling. However, credit cards are still a hot topic of conversation among the devout. If in doubt, we advise asking your imam for advice.

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