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Islamic Credit Cards
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Glossary

Qard Hasan

A loan on which the lender gets back exactly what was lent and nothing more.

قرض حسنqarḍ ḥasan

Qard is a loan and qard hasan is the benevolent version, carrying no return for the lender. In Islamic law lending is charity, not commerce, so any pre-agreed benefit to the lender on top of the principal is riba. AAOIFI Shariah Standard No. 2 confirms that a cardholder may draw more than his available funds with the issuer's agreement 'provided no interest is charged', which its Appendix B calls 'a permissible loan'. The trap is the fee attached to the loan: Bank Negara's SAC held that a fee set as a percentage of the credit limit raises 'the issue of conditional benefit on loan (qard), which is prohibited'.

This is also a card contract structure

The bank lends you the money and you pay back exactly what you borrowed, not a penny more.

How Qard Hasan works on a credit card

Related terms

RibaAny extra amount a lender gets back on top of what was lent, which Islamic law forbids.UjrahA fee or wage paid for a service done for you.DaynA debt: money you owe to somebody.KafalahA guarantee: one person promising to cover another person's debt if they do not pay.

Sources

  • AAOIFI Shariah Standard No. (2) clause 4/5/1 and Appendix B items 8 and 9; Shariah Standard No. (19); Bank Negara Malaysia, item 93

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