MURABAHA CREDIT CARD
MURABAHA CARD MURABAHA CREDIT CARD
A Murabaha credit card is based on the Islamic finance concept of "Murabaha," a cost-plus-profit method. The bank purchases goods or services on behalf of the cardholder and sells them back at an agreed profit margin, eliminating the element of interest or "riba."
The Murabaha credit card's primary role is to provide Muslims and those interested in ethical financing an alternative to conventional credit cards, ensuring compliance with Shariah laws that prohibit interest-based transactions.
The Murabaha credit card serves the modern financial needs of individuals while strictly adhering to the ethical and moral guidelines of Islamic teachings and like any credit card, it allows users to purchase goods and services, fulfilling their needs while paying back over an agreed period.
The Murabaha credit card in 2024 offers a credit facility that aligns with the principles of Islamic finance, particularly the prohibition of riba and transparency: Ensuring that all costs and profit margins are clearly stated upfront, avoiding any hidden charges or terms.
WHAT ARE THE PRINCIPLES AND MECHANISM OF A MURABAHA CREDIT CARD ?
Principles and Mechanism of a Murabaha Credit Card
Principles
1. Prohibition of Riba (Interest): Murabaha credit cards operate without accruing any interest on the amounts utilized, adhering to the Islamic prohibition of riba.
2. Fixed Profit Margin: Unlike interest, which can fluctuate, the profit margin in a Murabaha contract is pre-determined and transparently communicated at the time of the transaction.
3. Full Disclosure: All terms, including the cost of the product and the profit margin, must be transparently disclosed to the customer, ensuring no elements of gharar (excessive uncertainty) or hidden terms.
4. Immediate Ownership Transfer: Once the bank purchases the item, ownership is immediately transferred to the cardholder, even if they haven't paid the full amount.
Mechanism
1. Transaction Request: The cardholder uses the Murabaha credit card to initiate a purchase.
2. Bank's Purchase: The bank buys the required item on behalf of the cardholder, becoming its temporary owner.
3. Resale with Markup: The bank then sells the item to the cardholder at a pre-agreed markup, which represents the profit for the bank. This total amount (original cost plus markup) is the cardholder's debt.
4. Repayment: The cardholder repays the bank in installments based on the agreed-upon terms. There's no additional interest charged on late payments, but there might be a fixed late payment fee, often directed to charitable purposes in line with Islamic principles.
In summary, a Murabaha credit card offers a Shariah-compliant method for cardholders to engage in credit transactions, where the bank's profit is derived from a transparent markup rather than fluctuating interest.
WHAT TYPES OF A MURABAHA CREDIT CARD ARE EXISTING ?
Types of Murabaha Credit Cards
1. Basic Murabaha Credit Card
Designed for customers seeking a simple, Shariah-compliant credit solution without extensive perks or rewards.
2. Premium Murabaha Credit Card
Caters to high-net-worth individuals, offering higher credit limits, exclusive benefits, and dedicated customer service.
3. Business Murabaha Credit Card
Designed for business owners and corporations, allowing them to manage their expenses in compliance with Islamic principles.
4. Rewards Murabaha Credit Card
Offers a range of Shariah-compliant rewards and benefits for cardholders, from travel perks to dining discounts.
IS THE MARKUP ON A MURABAHA CREDIT CARD THE SAME AS INTEREST?
International brokers who are acting as a kind of bridge between international banks try to bring the best deals for borrowers who are mandating them for an overseas loan.
Markup in Murabaha: The markup is a profit margin that's pre-determined and agreed upon at the inception of the transaction. It's justified as a profit from a trade or business transaction. The bank purchases an item on behalf of the customer and sells it back to the customer at a markup. This sale is considered a legitimate trade in Islamic finance.
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