Switch and Join Rewards in Banks
The question, as received
Are the current account switch reward offers at Santander, Natwest & First Direct permissible to accept. Are cashback from a Santander 123 Lite account or Natwest rewards account permissible to accept? [Question published as received]
The answer
1) The incentive conventional banks and other conventional financial institutions offer to potential customers, labelled ‘Joining or Switching Bonus’ depends on the terms and conditions of the switch. Whilst we cannot specifically comment on any particular offer without reviewing the terms and conditions, in principle, if there was a requirement to transfer a minimum balance to the new account, then the Switching Bonus will not be lawful. It will be a form of Riba.
Condition: The bonus or cashback is unlawful if the terms require transferring or keeping a minimum balance.
Explanation
2) The permissibility of cashback rewards offered by conventional banks to customers depends on the terms and conditions. Whilst we cannot specifically comment on any particular cashback reward without reviewing the terms and conditions, in principle, there must not be any clauses in the terms and conditions which require you to keep a minimum balance with the bank.
The warnings against Riba are severe, the Qur’an and the Sunnah state:
“O you who believe! Remain conscious of Allah, and give up all outstanding gains from usury, if you are [truly] believers; for if you do it not, then know that you are at war with Allah and His Messenger. But if you repent, then you shall be entitled to [the return of] your principal. You will do no wrong, and neither will you be wronged.” [Surat Al-Baqarah, 278-279]
The Prophet Muhammad (salallahu alayhi wasallam) said:
“Cursed is the one who takes interest, and the one who pays it, the one who records it, and the two who (accept to be the) witnesses for signing it.” [Muslim]
Fiqh basis
When a customer is obliged to deposit money into a bank to qualify for such rewards, he or she is in essence providing the bank with a loan upon which the bank promises to pay back, albeit with additional ‘rewards’. The reward in question is considered to be interest. Any contract wherein there is a requirement to lend to receive additional benefit is a form of Riba.
A famous juristic maxim states: “Any loan which draws an increment is Riba” (Ibn Abi Shaybah).
‘Allamah Marghināni and other jurists describe Riba as the unjustified excess which one of the transacting parties assume entitlement to, either contractually, virtue of custom , or by pre-agreement.
And Allah knows best.
Maulana Ammar Y Badat
Reviewed and approved by Mufti Faraz Adam
References
واما الرِّبَا فِي الدّين فَهُوَ على وَجْهَيْن احدها ان يَبِيع رجلا مَتَاعا بِالنَّسِيئَةِ فَلَمَّا حل الاجل طَالبه رب الدّين فَقَالَ الْمَدْيُون زِدْنِي فِي الاجل ازدك فِي الدَّرَاهِم فَفعل فان ذَلِك رَبًّاوَالثَّانِي ان يَقُول رب الدّين للمديون قبل مَحل الاجل اعطني مَالِي فاحط عَنْك بَعْضًا من ديني فَفعل فان ذَلِك رَبًّا للمديون وَلَا يحل لَهُ ذَلِك(النتف في الفتاوى)
لأن الربا هو الفضل المستحق لأحد المتعاقدين في المعاوضة الخالي عن عوض شرط فيه، ولا يعتبر الوصف لأنه لا يعد تفاوتا عرفا، أو لأن في اعتباره سد باب البياعات(الهداية في شرح بداية المبتدي)
قال مُحَمَّدٌ رَحِمَهُ اللَّهُ تَعَالَى في كِتَابِ الصَّرْفِ إنَّ أَبَا حَنِيفَةَ رَحِمَهُ اللَّهُ تَعَالَى كان يَكْرَهُ كُلُّ قَرْضٍ جَرَّ مَنْفَعَةٍ قال الْكَرْخِيُّ هذا إذَا كانت الْمَنْفَعَةُ مَشْرُوطَةً في الْعَقْدِ بِأَنْ أَقْرَضَ غَلَّةً لِيَرُدَّ عليه صِحَاحًا أو ما أَشْبَهَ ذلك فَإِنْ لم تَكُنْ الْمَنْفَعَةُ مَشْرُوطَةً في الْعَقْدِ فَأَعْطَاهُ الْمُسْتَقْرِضُ أَجْوَدَ مِمَّا عليه فَلَا بَأْسَ بِهِ وَكَذَلِكَ إذَا أَقْرَضَ رَجُلًا دَرَاهِمَ أو دَنَانِيرَلِيَشْتَرِيَ الْمُسْتَقْرِضُ من الْمُقْرِضِ مَتَاعًا بِثَمَنٍ غَالٍ فَهُوَ مَكْرُوهٌ وَإِنْ لم يَكُنْ شِرَاءُ الْمَتَاعِ مَشْرُوطًا في الْقَرْضِ وَلَكِنَّ الْمُسْتَقْرِضَ اشْتَرَى من الْمُقْرِضِ بَعْدَ الْقَرْضِ بِثَمَنٍ غَالٍ فَعَلَى قَوْلِ الْكَرْخِيِّ لَا بَأْسَ بِهِ وَذَكَرَ الْخَصَّافُ في كِتَابِهِ وقال ما أُحِبُّ له ذلك وَذَكَرَ شَمْسُ الْأَئِمَّةِ الْحَلْوَانِيُّ أَنَّهُ حَرَامٌ وَذَكَرَ مُحَمَّدٌ رَحِمَهُ اللَّهُ تَعَالَى في كِتَابِ الصَّرْفِ أَنَّ السَّلَفَ كَانُوا يَكْرَهُونَ ذلك(فتاوى الهندية)
وقال في الخانية وتكره السفتجة إلا أن يستقرض مطلقا ويوفي بعد ذلك في بلد أخرى من غير شرط ا هـ
مطلب كل قرض جر نفعا حرام قوله ( كل قرض جر نفعا حرام ) أي إذا كان مشروطا كما علم مما نقله عن البحر (حاشية رد المختار على الدر المختار)
Based on the Hanafi school and on the question as it was asked. Another mufti may reach a different conclusion. Read the disclaimer.