Fatwa: # 19783
Category: Financial Transactions
Country: United States
Date: 22nd February 2012

Title

Is the 4% on my credit card in this situation an interest?

Question

I am trying to purchase a house for my family and I am 20,000 $ short of buying it cash to avoid a loan through the bank. My credit card company is offering me the option to get 20,000 $ cash advance with 1 year 0 % interest, after one year interest goes up to  14 %, there is also a one-time fee they call it ‘transaction fee’ and it is  4 % one-time fee. Is this is concerned Riba or is it Halal if I intend to pay the 20,000 $ during the 0 % period?

I am also concerned about the 4 %, is it Riba or not?

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykumwa-rahmatullāhiwa-barakātuh.

May Allah make all our tasks easy and grant all of us Halaal income. Ameen

In principle, it is impermissible to enter a contract which has a condition of interest upon default.

If one has entered in such a contract then he has to pay back the amount before the interest starts to accumulate on the loan.

According to our understanding, the 4% charged is a service fee. If this is the case then it is permissible to pay the 4 %.

And Allah Ta’āla Knows Best

Mufti Hussein Issa,
Mozambique

 

Checked and Approved by,
Mufti Ebrahim Desai.
www.daruliftaa.net

 

DISCLAIMER - AskImam.org questions
AskImam.org answers issues pertaining to Shar'ah. Thereafter, these questions and answers are placed for public view on www.askimam.org for educational purposes. However, many of these answers are unique to a particular scenario and cannot be taken as a basis to establish a ruling in another situation or another environment. Askimam.org bears no responsibility with regards to these questions being used out of their intended context.
  • The Shar's ruling herein given is based specifically on the question posed and should be read in conjunction with the question.
  • AskImam.org bears no responsibility to any party who may or may not act on this answer and is being hereby exempted from loss or damage howsoever caused.
  • This answer may not be used as evidence in any Court of Law without prior written consent of AskImam.org.
  • Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.
The Messenger of Allah said, "When Allah wishes good for someone, He bestows upon him the understanding of Deen."
[Al-Bukhari and Muslim]