Is it Permissible To Opt For A Credit Card With Lower Interest Rates to Pay Off A Credit Card With Higher Interest Rates?

Contemporary scholars are split in their opinions on credit facilities as a result of different cards in the market, different geographical needs, different factors affecting sustainability and development of the community. Whilst some contemporary scholars are of the opinion credit cards are not permissible at all even if one does not pay interest, other scholars such as Mufti Taqi Uthmani, Mufti Khalid Saifullah and Mufti Radha ul Haq have expressed the permissibility of using a card facility if one is confident of repaying the outstanding balance before any interest accrual¹.

The reasoning behind the above is that a credit card facility with 0% APR and interest accrual only upon default is essentially a loan with an irregular term in the contract. Irregular terms and clauses are void and nonexecutive in gratuitous contracts. Thus, the clause is considered to be inactive and dormant unless one fails to pay (A credit card with agreed and defined interest repayment from the outset is a interest (riba) contract and not a loan agreement different in ruling to the former credit card).

The principles of ḍharūrah (necessity) dictate that one should sequentially seek alternative modes of financing. Only if one cannot find any Shariah compliant financing or 0% APR financing, there is concession to apply for a credit facility with lower interest rates. Generally, this is not permissible as a credit facility with pre-agreed and guaranteed interest repayment is an interest bearing contract. However, the concession is premised on Istiḥsān (jurisitic preference) considering that one will end up paying less interest as a result and thus the sin of paying interest will be relatively less.