How does an Islamic credit card charge you?

An Islamic credit card does not charge interest. The bank earns a profit or fee through a Shariah contract, and charges you a late payment amount that it gives to charity. In money terms, the published rates sit close to conventional cards.

Which contracts do UAE Islamic cards use?

Each bank names its own structure in the key facts statement:

• Murabaha at Emirates Islamic. All its credit cards are based on Murabaha: the bank sells you Wakala certificates it has bought, at their cost plus a defined profit.¹
• Covered cards at ADIB. You fund a “cover limit” either with your own money or with the cash from a commodity Murabaha sale with the bank. The cover limit sits in a short-term investment account, and its profit is credited to your card account each month. With the Murabaha option, you pay the Murabaha profit in monthly instalments over 10 years.²

Banks must explain the Shariah basis of each product in its key facts statement and show the approval of the bank’s internal Shariah committee.³

What does an Islamic card cost you each month?

The figures are from each bank’s own documents.²⁴¹ Emirates Islamic gives a profit-free period of up to 55 days on purchases, which does not apply to cash advances or balance transfers.¹

Where does a late payment charge go?

To charity, under the bank’s rules. Emirates Islamic pays the AED 131.25 to a charity approved by its internal Shariah committee, after deducting actual expenses.¹ Central Bank standards require the charge to be based on an administrative cost and to include nothing that could count as interest on interest, and require the bank to tell you when it applies and how it is calculated.³ The bank’s Shariah committee must also make sure the charity obligation is not used if you are insolvent or bankrupt.³

Do the same consumer rules apply?

Yes. The Consumer Protection Standards apply to Islamic banks, with added Shariah rules.³ Regulation 29/2011 applies to Shariah-compliant banking services in full, except for how interest is computed, and requires clear disclosure of the rates used.⁵ Fee caps, statements, cooling-off and complaints work as for any card. See your rights as a cardholder.

Read the Shariah basis and the profit rate in the key facts statement before you sign, and compare the monthly cost using the interest calculator.

The small print

• Shariah basis disclosure is Consumer Protection Standards clause 2.1.1.42. Late payment charity rules are 2.1.3.12 and Article 11, clauses 11.1.1.10 and 11.1.1.11. Shariah contracts must include a 5 business day cooling-off option, clause 2.1.1.33.³
• Regulation 29/2011, Article (13), and Notice 2901/2011 allow Islamic banks to use terms such as profit and finance.⁵
• ADIB’s covered card statement uses a monthly profit rate of 2.99% in its worked example; its fee table shows 3.75%.²