Islamic Credit Card

Definition of "Islamic Credit Card"

It is an Islamic alternative to the conventional credit card. It has been suggested by some to operate as follows. The customer agrees to place X amount of funds into an investment account with the bank. The bank holds these funds, for purposes besides investment, as a security for the credit card. The customer has the facility of having liquid funds for his purchases while his own funds are accruing value through investment on the basis of mudarabah or musharakah. The customer meets his payments, as usual, on a monthly basis. The bank has the safeguard of the investment account in case of default. The funds attracted by these credit cards can also be used for regional development projects in which the investors will have interest.