Credit
Cards is a very convenient method of making
purchases without carrying cash.
The way a
normal credit card works is that you make purchases
using your card and the bank issuing the card will
pay on your behalf to the merchant providing you the
product or service.
The bank
deducts a certain percentage (2.5% normally) from
the merchant in return for processing the
transaction and adding the money to the merchant's
account.
From the
customer side (the card holder), he is given a loan
for that amount and given a grace period (normally
26 days to a month) to repay the amount interest
free. If the card holder decides he does not want to
pay the full amount, he pays the minimum (printed on
the monthly statement), and the rest of the unpaid
balance gets deferred in the form of a loan with
compound interest.
Many
consumers have gotten used to this, and use the card
as a loan machine.
Apart from
being convenient, credit cards offer other benefits,
such as frequent flyer miles, donations of a certain
amount or percentage to your favorable charity,
consumer protection (can refund the price of a
faulty product), extended warranty, ...etc. All
depending on the specific card in use. The largest
issuers of Credit Card worldwide by far is VISA
followed by MasterCard.
There are lots of others as well, including Diners
Club, American Express, Discover (USA only), JCB
(Europe), and others.
There are
certain services that one cannot get without a
Credit Card, including Car Rentals in North America,
and many internet services.
Another
feature of Credit Cards is that you can get Cash
Advances using it at bank outlets and Automatic
Teller/Banking Machines (ATMs/ABM). This is treated
as a loan, and interest is to be paid on it.
Therefore a Muslim should avoid this, unless it is
an emergency, where such an exception would be
permissible.
In short,
this has become a very pervasive aspect of our
modern life.
For the
Muslim, a Credit Card can be had, but extreme care
must be taken not to be late in paying the statement
balance in full, so as not to incur interest. If you
travel on a regular basis, you may miss a statement,
so maybe you want to talk to your bank about this
and explain that you travel and make other
arrangements.
Also note
that because you are paying during the grace period
on a regular basis, you will eventually be
"flagged" as an unprofitable customer to
the bank (you use their money for a month, and
generate no interest revenue for them). There has
been reports of some Credit Card Issuers in the USA
asking customers to pay an annual fee to compensate
for this "loss of revenue". If this is the
case, find another credit card company to do
business with, there are too many of them.
Bank of
Whittier over credit cards. Visit http://www.whittierbank.com/credit-card-org.htm
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