Islamic Finance

40 Islamic Finance in Practice

scholars allow taking a “collection fee” related to the actual cost of collection.

However, this is merely a collection fee, not a “late fee”, and the difference is

that a collection process should only be initiated to be able to charge for

amounts related to such items as telephone calls, emails, target mails,

personalized visits, etc.

With regards to an overdraft amount, which arises when someone uses

their credit card for an amount over their credit line, this is completely

ignored since in Shari’a there is nothing called a “credit line”. The customer

is allowed to withdraw or make purchases and this is considered a loan. The

customer has to return the same amount that he/she took out. If the

customer makes an offline transaction that causes them to go over their

limit, this will be considered an attempt to steal from the issuer (since he/

she knew they would be over their limit by this transaction). However, the

credit card company cannot force the customer to sign a clause to make him/

her pay the overdraft amount.

Interchange fee

Banks and credit card companies can charge merchants a fee as the issuers

of the card. This fee is usually collected by the acquirer (ie. the merchant’s

bank) and then sent to the issuer through an international company, such

as VISA or Mastercard−this is called an “interchange fee”.

This fee is the only clear fee and is approved by both schools since the

customer does not pay any extra money and the merchant is the one to pay

the fee. Fees usually range from 1.1-1.85 per cent of the purchase amount.

However, this fee should be reconsidered by Visa and Mastercard as more

Islamic cards are currently being introduced into the market. Demand for

these newer Islamic products is high and Islamic credit card issuers might

try other ways of making profit out of their cards, which makes some of the

customers reluctant to apply for a card; however, if this fee is more attractive

to the issuers then they will not try to charge more fees or go with semi-

Islamic approaches.

Fee for cash withdrawal

This fee is exactly the same as the fee described as an “annual fee”, and

therefore the same argumentbetween the two schools applies.

Exchange difference coming from purchases with foreign

currencies

This fee is the most complicated fee and it is the most difficult to solve. The

issue here is that there are two transactions in one− there is a loan

transaction and an exchange transaction in the same purchase transaction.

This is a problem because the exchange rate to calculate the amount should

be calculated at the rate of the date when the customer is going to pay the