Plastic Cards

Innovating Islamic Plastic

A Value Added Socially Responsible Alternative

Sayd Farook

Credit cards are issued by banks to provide liquidity to their customers , by providing a credit facility that might help them in managing their finances. Nothing is for free , the conventional banks charge high interest rates on the extended credit, there are grace periods or interest free periods that depends on the bank’s policy , but after this period they charge interest. Banks benefit when customers extend their credit facility beyond the interest free period, credit card business is one of the most profitable business line in banks.

Credit cards create financial problems if misused, it pushes a person to spend beyond his financial capability, this is a major problem now with many consumers here in Bahrain, GCC and other countries . Also, the interest starts accumulating and the customer pays only the minimum balance. The system is designed this way, credit card companies make most of their profits from customers who pay just the minimum amount required, since they charge high interest rates.(1)

The consumption spending in such a manner without providing awareness and education to the customers , banks and specifically the credit card business line raises a serious ethical question. Credit cards mechanism has a serious Islamic religious restrictions , the interest rate charged on the credit facility represents unacceptable usury, the consensus definition of which is an increase on money lent.

The demand to manage liquidity facilities is still there and a person cant neglect the need for a mechanism that helps in providing short term finances . Islamic banks have come up with innovative credit card products , with the major restriction of imposing any charges on the extend of principal owing. Islamic banks, have used other ways that is shariah compliant to profit from credit cards, the use of profit rate or fee to be charged that is fixed and known...