Sharia Compliant Cards: Addressing Differences


Credit cards are the most common currency in the world and they are certainly more convenient than carrying around dollars, dirhams, or yens. But credit cards differ significantly from country to country. In the United States standard payment terms are around 2.5% of your card balance but in South Africa, an average credit card is like a secured credit card and also gives the issuing company the right to offset your bank account.

MySalaam is a Gulf region lifestyle offering by the Dubai Islamic Economy Development Centre and Thomson Reuters. Besides today’s feature, you will find stories ranging from modest fashion trends that comply with local standards and ‘all-female ride sharing, taking on Uber’ to comply with restrictions on driving.

The feature is an interesting read about sharia-compliant credit cards because of the Islamic rejection of credit card interest. This is an important consideration for credit card companies because according to Pew Research, Muslims represent 1.8 billion of the 7.5 billion population of the world.

The credit card industry in the west loves interest. In the United States alone, interest accounts for about 40% of credit card profits. On the contrary, in the Islamic world, interest is haraam, or forbidden. Now consider this analogy:

  • One opinion is that if you already have the money you need to make the purchase, then it is permissible to use your credit card as long as you pay off your credit card immediately. Most banks allow customers a 25-30 day ‘grace period’ before the interest kicks in, so by paying off your credit card immediately, you will not pay any interest.
  • Avoid getting caught in the debt trap. People who spend beyond their earnings and/or savings are the perfect target market for credit card companies. Keep in mind that credit card companies that offer 0% introductory interest are doing so with the motivation that you will pile up a large balance during this period and will be unable to repay it before they start charging interest.

Assets in the global credit card market, including counties like Luxembourg, Hong Kong, and Great Britain, exceed $1.6 trillion, according to an article published by the USA Today some years back. When viewed from a global perspective, there are three important takeaways from the credit card business:

  • As opposed to cash, credit cards are inter-operable around the world and are accepted and converted almost anywhere.
  • All credit cards may look the same, but they are not equal in their features or benefits.
  • Understanding the nuances specific to individual credit card markets is essential to doing business worldwide.

RELATED: Want a better credit card? Click here to compare the best credit cards in the UAE

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