Is it permissible in terms of customers and tradesmen to shop in installments with a credit card?

The Answer

Dear Brother / Sister,

Purchasing by credit card in installments:

1. Some institutions, such as participation banks, collect each installment separately each month, and it is deposited to the owner’s account each month. In other words, the owner cannot withdraw the money from the financial institution before the time is due. Thus, shopping is done without any doubt. We recommend this practice.

2. It is an issue that some banks apply related to vehicles or credit cards as you say. Since the customer is not aware of this practice, the issue is of particular interest to the owner. In other words, the customer does not make such an agreement; the responsibility belongs to the seller. Therefore, there is nothing that directly concerns the customer. However, since getting credit is in question, though indirectly, we can say that it is makruh even if we do not say that the customer who does it commits a haram deed. In this respect, it would be better to learn how the banks and the sellers agree and then shop. However, it seems difficult to say that a person who does such a purchase commits haram.

3. As for the issue of getting the money early by giving a certain percentage to the bank before the installment time comes: The workplace that sells things by credit card can receive the price of the goods it sold from the bank on the payment date of the customer. It is not permissible to get less money from the bank by drawing the money from the bank before this date since interest will be in question. (Presidency of Religious Affairs)

They liken this issue to negotiating checks and promissory notes in general. Therefore, we would like to answer by explaining the state related to negotiating checks and promissory notes.

When the seller or owner needs cash, he takes the check or the promissory note before the payment day and transforms it into cash in a bank. In other words, the bank takes some of the money in the check and promissory note, pays the rest to the owner; thus, he receives cash though it is less than its value. He takes a smaller amount of money than what is written on the check from the person who pays it in advance and gives the remaining money to the payer. In that case, what is the amount that he gives to the one who pays him in cash in return? It is definitely the interest of the cash he receives. If we say, “It means borrowing money with interest”, it will be more understandable. That person virtually says to the person to whom he gives the check and the promissory note, “When its time is due, you will get more money with this check or the promissory note. So, now give me this amount in cash, and take the remaining amount as interest on the money you gave me.” That is the gist of the matter.

Paying interest and borrowing money. A person who sells something in installments by credit card wants to get this money before its time is due. He leaves some of the money to the bank and takes the rest. It is not permissible. In this respect, it’s like negotiating a check and a promissory note. There is the second option that is permissible regarding the issue; that is the one that is probably confused. We can express it as follows.

If the original owner of the check and the promissory note wants to pay his debt before the due date, the creditor can make as many discounts as he wishes. There is no drawback to it because it is a bilateral agreement between the creditor and the debtor. There is no third party negotiating the check. The creditor makes a discount to the debtor and the debtor pays ahead of time. That is how he gets the cash that he urgently needs. It is not interest; it is permissible.

Prof. Dr. Hamdi Döndüren states the following regarding the issue in his book named “İslami Ölçülerle Ticaret Rehberi”:

– If the principal debtor (the issuer of the check and the promissory note) wishes to pay off his debt early before its due date, it is possible and permissible. The creditor can also make some discount due to this early payment because there is no doubt that the creditor, who has the right to donate all of his receivable to the debtor, has the right not to receive a part of it.”

– “However, if a third person or a bank pays the price of the check and the bill before its due date and the creditor makes a discount on the check value, it means exchanging a debt for another debt on credit; the difference between them is regarded as “interest”!”

– “Nowadays, negotiating a promissory note is usually carried out by third parties.” p. (169)

We can express the other permissible and impermissible aspects of the issue as follows. If the debtor has not paid the check and promissory note on due date, it is also regarded as interest to extend the maturity a little longer and increase the debt a little more. However, in order to give the debtor a little more respite, it is permissible to convert the debt into gold from the date of payment and take the inflation difference up to the date when he pays his debt. Thus, the debtor gains a little more time, and the creditor is protected to some extent from the inflationary loss he will be exposed to. Both parties can have peace of mind.

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