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Islamic Credit Cards
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Glossary

Gharamah

A fine for paying late, charged to make you pay on time rather than to cover a real loss.

غرامةgharāmah

Gharamah is a penalty charge imposed for late settlement without the bank needing to prove any loss. Because it is not compensation, allowing the bank to keep it would be an increase on a debt for delay, which is riba. Bank Negara's SAC therefore permits gharamah but rules that it 'shall not be recognised as income. Instead, it has to be channeled to certain charitable bodies'. DSN-MUI takes the same route: its card fatwa allows a late charge which is recognised entirely as social funds. The OIC Fiqh Academy, in Resolution 109 (3/12), rejects penalty clauses in debt contracts as usurious in the strict sense.

Related terms

Ta'widhCompensation for money the bank actually lost because you paid late.Riba al-nasi'ahThe extra you are charged simply for being given more time to pay.SadaqahVoluntary charity, given whenever you choose and in any amount.DaynA debt: money you owe to somebody.

Sources

  • Bank Negara Malaysia, Shariah Resolutions in Islamic Finance, 2nd edition, item 81; DSN-MUI Fatwa No. 54/DSN-MUI/X/2006 clause Keenam (b); IIFA Resolution No. 109 (3/12)

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