Islamic Credit Cards

Thursday, 19 April 2007

A JEDDAH-based bank launched yesterday what it termed an "Islamic credit card."

But it comes with a price. Only those customers whose minimum income is SR17,000 a month are eligible for the card.

Titanium MasterCard has Shariah-compliant transactions while other credit cards have different methods, said National Commercial Bank' (NCB) Head of Personal Financing Zahid Homasani.

He, however, clarified that the existing credit cards in the Kingdom were not "unIslamic."

Titanium MasterCard Credit Card strictly follows four basic Shariah principles: the transactions are based on trading (buying and selling), money is not used as a commodity, it is interest-free, it forbids buying and selling of commodities prohibited in Islam.

Here the NCB acts as seller while the Islamic Titanium MasterCard Credit Card holder as a buyer. This ensued in a trading mechanism because bank was not acting as intermediary party in the whole transaction but as a seller, an NCB officer explained.

For instance, for a credit of SR10,000 the card holder buys anything worth SR5,000 and pays only SR3,000 and outstanding SR2,000 is invested by the bank in commodities to make profit, which makes the credit card Shariah compliant.

With an annual growth rate of 40 percent the Kingdom has around 1.5 million credit cards of various brand names in circulation.

However, 2006 was the record year in the Kingdom in terms of credit card subscription. Around 500,000 new credit card holders were added to the Kingdom's market.

By Shahid Ali Khan

© The Saudi Gazette 2007