What Is An Islamic Credit Card?
In Malaysia, more and more people are looking for financial products that align with their personal values. For many, that means turning to Islamic credit cards. These cards offer the same convenience as regular credit cards but with one important difference: they strictly follow Islamic principles (Shariah), avoiding things like riba (interest), gharar (excessive uncertainty), and haram (non-permissible) transactions.
How Do Islamic Cards Work in Malaysia?
In daily use, an Islamic credit card works just like any other. You can swipe, tap, or key in your details online to make purchases.
What makes it different is the underlying contract between you and the bank. If you don’t settle your full outstanding balance within the grace period, the bank applies the agreed profit rate or fee, which is fixed and non-compounding. It’s usually calculated daily, making it a much fairer system compared to conventional credit cards, where interest can pile up on top of previous interest.
What Are the Advantages of Islamic Credit Cards?
- Ethical Foundation: Adheres to Shariah principles, ensuring financial peace of mind.
- No Interest Charges (Riba-Free): Operates on permissible fees, not conventional interest, avoiding debt accumulation from usury.
- Transparent & Non-Compounding Fees: Charges are clear, fixed, and do not multiply on outstanding balances.
- Competitive Rewards: Offers similar benefits to conventional cards, including cashback, loyalty points, and travel miles, all ethically structured.
- Takaful Protection: Provides Islamic insurance coverage for enhanced cardholder security.
- Halal Transaction Screening: Some cards proactively prevent usage for non-permissible activities.
- Fosters Financial Discipline: Designed to encourage responsible spending and timely repayments.
Best Islamic Credit Cards in Malaysia
Looking for a Shariah-compliant credit card that truly rewards your spending? Here are some leading options in Malaysia, offering great benefits while upholding Islamic principles:
- RHB Islamic Cash Back Credit Card-i: Get up to 10% cashback on daily essentials like groceries, petrol, and utilities, maximizing savings on your regular bills.
- HSBC Amanah MPower Platinum Credit Card-i: Earn high cashback of up to 8% on popular categories such as petrol, groceries, and e-wallets for significant everyday rebates.
- Bank Islam Visa Infinite Credit Card-i: A premium choice with up to 8% cashback on online, auto billings, groceries, and dining. It also includes airport lounge access and substantial Takaful coverage for travelers.
Frequently Asked Questions About Islamic Credit Cards
Let's get straight to what Malaysians often ask:
1. Are Islamic credit cards only for Muslims?
Not at all! Anyone can apply for an Islamic credit card, regardless of religion. It’s about choosing a product that reflects ethical financial principles. As long as you meet the income and eligibility requirements, you’re good to go.
2. Do Islamic credit cards charge interest?
No. Islamic credit cards do not charge interest (riba). Instead, they apply a profit rate (Ujrah) or a management fee, which is considered a permissible charge for services provided such as processing payments, offering rewards, or managing the card. This charge only applies if you don’t fully pay off your balance within the grace period.
3. What happens if I pay late?
Yes, but not like conventional cards. You’ll incur a late payment charge, usually 1% of the outstanding balance, with a minimum RM10 and maximum RM100 as per Bank Negara Malaysia’s guideline. Importantly, these charges don’t compound, and many Islamic banks channel the late fee into charity (sadaqah) rather than keeping it as profit.
4. What’s the minimum income to apply?
This depends on the card tier:
- Entry-level cards: From RM24,000 per year (around RM2,000/month).
- Mid-tier cards: Typically RM36,000 to RM60,000 per year.
- Premium cards: Up to RM100,000 or RM180,000 per year, depending on benefits.
Always check the specific card’s Product Disclosure Sheet (PDS) for accurate info.
5. Do I still get cashback, reward points or air miles?
Definitely! You can earn cashback, reward points, or air miles with Islamic credit cards, just like any other card. These rewards are structured in a way that’s Shariah-compliant, meaning they’re earned from permissible transactions and don’t involve interest or unethical activities.
6. Do Islamic cards come with Takaful protection?
Yes, many of them do. You can get coverage for things like travel accidents, loss or damage to purchases, and even the outstanding balance in case of emergencies. It’s a practical way to protect yourself and your loved ones.
7. How do banks make sure these cards follow Shariah?
Every Islamic bank in Malaysia has a Shariah Advisory Council (SAC) made up of qualified Islamic scholars who vet and approve financial products. On top of that, Bank Negara Malaysia has its own SAC, whose rulings are binding across the industry. So yes, there’s a thorough and trustworthy system in place.
8. What if I accidentally use it at a non-halal merchant?
Most Islamic banks use Merchant Category Codes (MCCs) to filter and block transactions related to non-permissible (haram) activities like gambling or alcohol. If a transaction is blocked, it won’t go through.
9. Can I do balance transfer from a conventional credit card?
Yes. Islamic banks offer balance transfer facilities using Shariah-compliant contracts such as Tawarruq or Ujrah. Instead of interest, you pay a one-time management fee, and sometimes you can enjoy 0% profit charge promos for a set period (e.g. 6 or 12 months).
10. Can I withdraw cash from my Islamic credit card?
Yes. This is called a cash advance, and it’s offered under the Ujrah concept. You’ll be charged a service fee, typically around 5% of the withdrawn amount or RM10 (whichever is higher), and a daily management charge (not compounding). Terms vary by bank, so check the Product Disclosure Sheet.
