What is the Ruling on receiving rewards banks give to their depositors for using their debit and credit cards?
باسم الله والحمد لله والصلاة والسلام على رسول الله وعلى آله وأصحابه ومن والاه
Firstly, regarding the rewards in relation to debit cards; the relationship between a depositor and a bank, from an Islamic Jurisprudence (Fiqh) standpoint, as per the view of the majority of contemporary Islamic Scholarship, is one of a lender (loaner) and borrower (loanee), with the depositor, in effect, being the lender, and the bank, in effect, being the borrower.
As a result, according to Islamic Law, when someone establishes a bank account and deposits money into it, they are actually lending the bank the money because the bank does not place the money in a safe-keeping box for the depositor, as should be the case in a safe-keeping transaction, but instead uses it for other purposes, with a promise to pay back the deposited amount to the depositor upon a set of agreed terms and conditions.
Due to this conduct on the part of the bank, Islamic Law views the bank as a borrower since it is deemed necessary for it to guarantee the return of the deposited funds, just as a borrower is required to do in a loan-based transaction.
Additionally, according to Islamic law, a loan cannot be used to increase one’s wealth; as a result, the only claim a lender has over a borrower is the right to the principal amount of the loan, and nothing more. Any excess, above the principal amount, received by the lender as part of a loan-based transaction is considered Riba (or Usury/Interest).
Based on this analysis and conclusion, and given that the transaction is viewed as a loan-based transaction from the perspective of Islamic Law, it would NOT be permissible for a depositor (lender) to take advantage of any rewards offered to them by the bank (borrower) in connection with their deposit account, as these rewards would constitute an excess amount being paid to them by the bank, above the amount deposited with the bank (or loaned), in accordance with Islamic Law.
Secondly, in terms of rewards associated with credit cards; then on the premise of the credit card being a standard one, and not a top-up one, and on condition of the rules of Islamic Jurisprudence (Fiqh) governing the usage of credit cards being met; it would be PERMISSIBLE to benefit from the rewards received as a result of using the credit card, provided that the rewards involve an offer that is recognised as permissible in Islamic Law.
In this scenario, the credit card issuer will be considered the lender, and the credit card holder the borrower from the perspective of Islamic Jurisprudence, and the rewards provided by a lender to a borrower will be regarded as a gift (act of benevolence) within Islamic Law.
Finally, whilst this answer is carefully shared in relation to the question asked, Islamic Law prefers for those seeking Islamic Rulings to physically engage specialists in Islamic Jurisprudence (Fiqh) who are renowned for their responsible scholarship, as actual circumstances regarding the topic at hand can differ from person to person, which may affect the ultimate Islamic Ruling with regards to that person. The Islamic Finance Advisory of the the Islamic Council (IC), which is a non-profit service headquartered in London, is an excellent resource for Muslims globally to engage for their faith-based financial matters and affairs.
And Allah knows best
Sh. Dr. Sajid Umar
Blackburn, United Kingdom
20th January 2023