Are credit cards indispensable?

Transcription

1. Credit cards : Are they indispensable? Mubashir Hassan "There will certainly come a time for mankind when everyone will take riba and if he does not do so, its dust will reach him." (The Prophet Muhammad (‫)ﷺ‬, Abu Dawud, & Ibn Majah) Credit cards seem to have become inseparable parts of our lives, valued not just for convenience, they add glamour to our life style. It appears thrilling to pick out the card from your wallet and make payments for the items you shopped by just a swipe, or to make online transactions. The added pleasure is that it does not matter whether you possess the money or not when you want to shop. You can get Air tickets booked, pay mobile and other bills and save the commission of the agent and the time. Interest is not charged if the bills are paid within a stipulated time and you enjoy the benefits without any hassles. That is all about the fun of credit cards. The introduction of online shopping, acceptance of credit card mode of payment by various institutes and the facility of buying on EMI’s has given impetus to the use of credit cards and the number of people obtaining and using the credit cards is increasing. Banks are now offering credit cards liberally and they even give you some incentives in the form of some discounts on specified sites in order that you obtain one. Initially you obtain it thinking about its merits and resolve to use it in case of real need, but with the passage of time you use it often and get steeped in debt. Credit card encourages you to buy things on mere taking fancy to them, no matter whether you are in need or not. The credit card holders consume more presuming they can afford and make payment within the stipulated time, but as you keep on shopping, bill piles up and it becomes difficult to pay in time and you end up incurring huge debt. The bank allows you to pay only a part of your outstanding balance and you go on with spending more with deferred payment, your bill goes up and you keep paying interest. The Bank just wants you to stay in debt so that they can get exorbitant interest from you. You may be happy for being able to buy luxury items on EMI’s which otherwise you can’t afford, but it escapes your minds that while buying on EMI’s you buy things you really didn’t need and pay interest on the debt so incurred. People even hold Multiple credit cards and when the credit of one matures, they transfer the credit to other cards (i.e. pay it off with other credit card), thereby getting more deeply in
2. debt . It appears that in very near future the credit cards would be fashionable even in Kashmir and even the day to day grocery items would be purchased through credit card. Once you get used to credit card, it becomes hard to get rid of it and you live under the mistaken notion that you use it however the reality is that it is the credit card which has put your energies in the use of various lords. Anyway you get involved in Riba and even if you make payments within time even then you enter into a contract wherby you agree on paying interest. Prophet Mohammad (‫ )ﷺ‬cursed the receiver and the payer of riba, the one who records it and the two witnesses to the transaction and said: "They are all alike [in guilt]." (Muslim, Tirmidhi & Musnad Ahmad). The excessive use of credit cards has become an area of economic and social concern in societies where they have been in use for some considerable time now, as the use of credit cards has led to the increasing debt. According to an analysis of Federal Reserve statistics and other government data (as of Dec 2014), the average US household is burdened with a credit of $7,283 on their cards and obviously it would only be the lower and middle income families who are under credit. (When average figures are taken it takes into consideration and counts even those who do not have debt.) In our state the use of credit cards is in its infancy and is not so widespread yet and as such its Economic and Social concerns are not significant nor are they known to common people nor has any study been conducted in this regard. The defaults are occurring at individual level and so people in general are not aware and even those who are suffering from the credit card driven debt are themselves unaware of their real cause of problem. The Economists tell you that spending more is good for economy, as it leads to more consumption and therefore creation of jobs. But here the contrary may be the true. When you get into debt, you are unlikely to consume, you end up paying your previous debt and the interest on it, which goes into the pockets of those who have extra money to keep in fixed deposits. In fact a survey carried out by Tufan Ekici & Lucia Dunn show that credit card debt has a significant and negative impact on total household consumption growth. Even if that contention be true why should anybody’s job be linked to your lavish spending and getting into debt? They do not tell you that it helps capitalists to get more sales and higher turnovers. Anyway we Muslims have been asked to be prudent in our dealings and those spending wantonly and lavishly have been compared with the brothers of Satan, “…..and squander not (thy wealth) in wantonness. Lo! the
3. squanderers were ever brothers of the devils , and the devil was ever an ingrate to his Lord.”(Sura Isra 26-27) If anybody is benefitted from this credit card, it is the bank, the shopkeeper and the card provider who are really benefited. Card issuer gets the commission, Bank gets interest and the shopkeepers enhanced sales. To give an example in fiscal 2013, Visa's net profit was just under $5 billion and that of MasterCard's $3.1 billion. The credit card user simply gets into debt and pays interest on that. This is not hypothetical, but is borne out by various reports and studies conducted in this behalf. (The space constraint does not allow it to be reproduced here). Let me be clear that the owners of the credit cards like Visa and Master Card etc. have right to charge their fee on the services they provide, my contention is to create awareness as to what is happening behind the scenes. These services are not being provides as a matter of charity, but their own interests are behind it. We too ought to think about our interests in a pragmatic way. Were do we stand? Are credit cards indispensable and can we do without them? Yes we can live without them quite conveniently and with dignity. The ideal position should be the avoidance of all banks dealing in Riba, but presently it is not practicable as we do not have any alternatives. The most we can have is something with lesser evil. The debit card is a good substitute. We can perform any transaction with a debit card in lieu of the credit card except that the debit card does not allow you to buy on credit. Whatever transaction you perform with your debit card, it is deducted from your balance and this way you act more prudently. You have an eye on your means and can’t go beyond them nor do you get trapped in unnecessary debt and are saved from paying interest. Email: mubashir_07@rediffmail.com