Overdraft and Credit Card Facilities

DSN-MUI permits Islamic credit card structures under the following models: (1) Qard hasan: the card issuer extends an interest-free loan; the cardholder pays only the principal with no interest on outstanding balance. Fees for services rendered are permissible. (2) Ujrah model: the card provides a service (payment processing, deferred settlement) for which a fee is charged — not linked to the amount of credit used. (3) Kafalah wa ijarah: the bank guarantees payment and charges a fee for the guarantee service. In all models, late payment must not attract compounding riba — only administrative fees to discourage default.

Credit cards serve legitimate financial functions. Their prohibition of riba is achievable by restructuring the credit extension as qard hasan or the service as ujrah, separating the payment service from credit provision.