What is an Islamic Credit Card?

One of the latest banking products offered by Islamic institutions, is the Islamic credit card. Using the principles of Al Bai Bithaman Ajil (deferred payment sale), the bank issues an interest-free and penalty free credit card. As goods are purchased using this credit card, the bank will render the transaction on your behalf and simultaneously sell it back to the customer. This credit is payable over a deferred period through installments within a certain time frame.

Features on Islamic Credit Card



  • This product is open to Muslims as well as non-Muslims.
  • A small fee may be charged annually for the credit card.
  • You may enjoy the value-added benefits of conventional credit cards e.g. bonus points, gifts, shopping discounts, travelers’ cheques etc.
  • You may need to have some kind of collateral of some form, that has been agreed to earlier with your financial institution, may be required.
  • A credit limit will be based on your collateral value.
  • It may be possible to obtain general Takaful coverage.
  • Some banks may provide other services such as zakah payment via this credit card.
  • It may be possible to apply for a supplementary card.



The concept of ‘Al-Bai’ Bithaman Ajil’

In modern Islamic banking, the term Al-Bai’ Bithaman Ajil refers to a buying and selling transaction between the bank (or financial institution) and the customer, whereby the former buys a property (or an asset, e.g. a house) at the prevailing market price and sells it to the customer at a mark-up price where payments are made by installments over a period of time agreed upon by both parties. The profit earned by the bank is legitimate from the Shari’ah point of view since the transaction is based on a sale contract rather than a loan contract. Any predetermined profit arising from the loan is prohibited in Islam as it amounts to Riba.



The Authority on Islamic Credit Cards

Prof. Dr. Mohd. Ma’sum Billah has written [1]Islamic Credit Card in Practice . As an authority on the conecept of Isalmic Credit cards. He is Professor of Islamic Financial Regulations, Assoc. Professor of Law (Insurance, Takaful, Islamic Banking, Finance & E-Commerce), Faculty of Economics and Management Sciences, International Islamic University Malaysia He is also an Adviser and Consultant to several Companies and Institutions. www.islamic-insurance.com E-mail: masum2001@yahoo.com