Islamic credit cards
Apologies if this post shows up twice..
I've been reading about how Islam forbids the charging of interest on money. So, if I borrow money from an Islamic bank, do I have to pay any interest, and specifically, what if I have an Islamic credit card? Is there 0% interest on it? Wouldn't this mean nobody would use mainstream banks and secondly, how are the banks supposed to make a profit? Why would they want to lend anyone money if there is no interest on it? Would love to hear the truth explained on this matter. Thanks
It works with purchases like cars and property, but i dont see how it can work with credit cards. The banks purchase it on your behalf and re sell it to you with a pprofit and then you pay thme monthly until the end of the loan, it does end up costing more than a normal bank, especially if you pay it off early. credit cards though get a bit complicated, i would be interested to know how banks here do that.
We took out a loan from an islamic bank in aus but they dont provide credit cards, only loans for properties and vehicles.
google might be an idea Nigel.. yes/no/maybe? :p
i found this on wikipedia, which answers my question:
consider the practical reality of purchasing a vehicle from an Islamic bank under an allegedly "zero interest" loan. The procedure, generally, is that the client tells the Islamic bank which vehicle he or she would like to own. The Islamic bank then purchases that vehicle in its name, and sells it to the client at a marked-up price, under an agreement that the new marked-up price of the vehicle must be paid in a certain number of installments of a certain time period. Thus a $20,000 car might cost $35,000 if purchased from an Islamic bank at "zero interest," 5 year loan. One may reason that the Islamic bank charges the extra $15,000 on top of the $20,000 cost of the car because money has a time value (that is to say, a payment of $20,000 5 years from now is worth less than a payment of $20,000 today). This is also why a $20,000 car could cost $35,000 if the purchase were financed by an interest bearing loan issued by a non-Islamic financial institution. However, where under an Islamic bank one would end up paying the extra $15,000 no matter how quickly he pays his 'loan', under non-Islamic banking one can end up paying less if he repays his loans quicker.
You can start here, nigel.
http://www.islamic-banking.com/ibanking/whatib.php
so what are the fees? what do they call them then? are they like monthly charges for every month you have an outstanding balance? am really interested to know how this model of finance works. i'm sure there's a website something that says so
HSBC grrrrrr!!!
I don't, nigel.
well I'm sure they can't compete with the likes of HSBC credit cards for sheer expensiveness. But.. if it's just other fees, in place of interest, how can anyone take them seriously?
They invented other fees, they just don't call it "interest".