In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
Dear brother in Islam, we would like to thank you for showing keenness on knowing the teachings of Islam, and we appreciate the great confidence you have in us. We hope our efforts meet your expectations.
Responding to the question, Dr. Monzer Kahf, Scholar in Islamic Economics & Financial Expert, states the following:
"The credit card matter is a kind of complicated issues. Take the following point as a simplification:
1. Credit card contract has a conditional interest (Riba) clause. Credit cards may be used to pay for purchases and to withdraw cash. The condition is left to the customer to activate. If you pay within the grace period, without withdrawing cash, there will be no interest. Cash withdrawal activates the interest clause from the day of withdrawal (you missed this part, you can see it on the statement, it is in addition to the 1.5% charge) and leaving a balance in your account activates interest from the date of the statement (not from the end of the grace period).
2. The above means that while it is forbidden for any Muslim or Muslim Bank to issue credit cards contracts with this condition, and it is forbidden too for any Muslim to sign such a contract if there is possibility for him/her to use it in such a way that activates the Riba clause (by the way it is also much costlier that even direct borrowing from a Riba-based bank), it is permissible to sign such a contract and use the card for purchases only for all Muslims who are sure about themselves to pay within the grace period and not to use it for cash withdrawal (they must be sure of their accuracy and capability of payment on time).
3. The charge or commission issuers of credit cards take from merchant is permissible, so are the membership annual fees. Further, the problem in cash withdrawal is not handling fee (i.e., the 1.5% you mentioned) but the activation of the interest clause as mentioned above."
If you have any further questions, please don't hesitate to write back!
May Allah guide you to the straight path, and guide you to that which pleases Him, Amen.
