Fees charged by an Islamic bank for overdrawing
Fatwa No: 100159

Question

Al sallamu Al laikoum I am in the UK, and I want to open a bank account, here I found this newly established service from HSBC bank called "HSBC AMANAH" and following are the terms of the Islamic banking: Overdrafts You are not permitted to overdraw this account. If the account is overdrawn: overdraft review fee - £25.00* *Important Notes 1. £25.00 may be charged on each occasion that you:- go overdrawn or further overdrawn 2. You will not be charged a review fee if you go overdrawn or further overdrawn by £10 or less. 3. You will not be charged a review fee if you have not gone overdrawn in the last 6 months. 4. You will not be charged review fees for more than the amount by which you have gone overdrawn in any one month. 5. You will only be charged review fees a maximum of 5 times in any one month. We reserve the right to change our fees and when we will and will not charge fees from time to time. Debit card Using your Card abroad Cash Machines: At all machines displaying a Maestro/Cirrus logo 1.5% of the cash advance (minimum £1.75) Point of Sale: Wherever you see the Maestro logo Free. Full fee details are contained in the Amanah Price List Important Information † For charging purposes a month is not a calendar month but begins on the date your account opens. For example, if you opened your account on 20th January, your charging period will be from the 20th of each month to the 19th of the following month. Now my question is, is it Hallal from your point of view to deal with such services? and please do check their website for further details. Reference: www.hsbcamanah.co.uk

Answer

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad  sallallaahu  `alayhi  wa  sallam ( may  Allaah exalt his mention ) is His slave and Messenger.

 

An overdraw is a debt on the customer to the bank, and in Islamic law, a loan should be paid back with the exact amount which one borrowed at the first place without conditioning any additional charges, if any interests are conditioned, then this is Riba (interest and/or usury).

What you mentioned in the question is Riba, it is as if the bank, in its new service, is saying to the customer 'if you want to deal with us with Riba, then we do not see any harm, and at any time you borrow from us a given amount, you will have to pay an interest on top of it'.

This is the reality of the transaction which you mentioned, and naming it account service fees and so forth, does not change the reality.   

Therefore, it is not permissible to deal with this service by overdrawing more than the amount available in the account. With regard to the credit card, it has the same ruling as the above; this card is not permissible if it is used for the overdraft and the customer is obliged to pay an interest on top of the original loan whether it is a little or a large amount.

Allaah Knows best.

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