from cash to credit cards

[Bosco 1]

Most of our spouses are coming from places that deal primarily in cash, and carry little or no personal debt. It is a so different here, credit cards, store charge cards, bank interest, college loans, car loans, etc. Most Americans carry personal debt.

For Muslims, this can carry an extra twist since many believe interest is haram, but there are some things that are difficult if not impossible to do without credit cards - book a hotel room, plane ticket, rent a car.

How has your spouse adjusted? If he/she is not already here, is it something you have discussed? Do they have a strong aversion to carrying any debt or have they embraced credit cards?

[UmmSqueakster 54]

Well, we've come to a kind of understanding with our credit cards. I didn't have one until after I graduated. I enquired with a sharia compliant home loan company about what would be required to get a loan, and they immediately asked about my credit history

So, I got credit cards and promptly ran up a debt paying for my paralegal cert. on them. Bah. We've managed to move that debt around to cards with no interest for the first year on balance transfer, blah blah blah, and are working our way out of (my) debt.

Once we're debt free on my cards, we're intending to only use them for automatic payments (cable, cellphone etc) and pay them off each month so we're not dealing with the interest.

My husband also has applied for his first credit card, and will be using it to make small purchases each month and paying it off right away, in order to build credit so we can get a house and a second car in the future.

So, at least in my experience, credit cards are a necessary evil, but if you use them wisely, you can avoid the interest.

If a spouse has issues with them, I suppose the compromise would be to only have a debit card, but then, no credit history being built. It's a catch-22. Any ideas on how to build the credit history without getting into riba?

[amal 4]

there are some things in this country that are considered haram but are unavoidable. I have heard many ppl say that they (or their so's) have had to adjust to what's available here. He doesn't like interest, but he has no choice when it comes to traveling and using credit cards. Without credit cards, we would not have been able to make the trips we've made and do the things we've done......

[Jenn! 918]

Wadi's embraced credit cards as much as I have. In fact, we're currently figuring out how to move stuff around and get rid of some of our debt. We have a love/hate relationship with our credit cards...

[MHandMB 0]

Well, I have credit card debt from when I lived in Paris and was without a job for a year, so I am having issues with trying to get that paid off. When he found out the interest rate on that, he went nuts, but we're currently working to get that paid off. Once I get that done, we'll have no debt except...

we're trying to buy a townhouse. He says he doesn't want any type of interest, etc., but agrees that it's necessary for home loans only. He is willing to be part of a loan in this area, but that's it.

We did get him a credit card to build his credit, but as soon as he buys something with it, we pay it off the next day so there is never any interest.

You can get by with no credit cards here as long as you have a debit card, but you have to have some sort of credit to buy a house unless you just have huge wads of cash lying around, and I don't know of any place that gives you a loan with no interest rate.

[Bosco 1]

I am not really convinced about the Islamic bankers home buying programs. I have read the fine print and it seems like the just change terminology to do the same thing. In fact, with a couple of the websites I checked, we would end up paying more than you would with a bank loan at the current interest rates! I think they are good in that they provide Muslims an alternative - but again, don't know if I personally consider it very different.

I have read pretty solid arguments that fixed-rate term loans are not what was intended by the riba prohibitions - that they were meant to avoid debts that could potentially never be paid back, where the rate changed, specifically where one party was taking advantage of another with loose terms (like loan sharks or credit cards where they can change your rates). However, it seems the common understanding is that riba applies to any and all interest, and this is definitely what my husband believes. He wants no part of any interest.

Not sure how you build a credit history without riba Is it possible?

Well, we've come to a kind of understanding with our credit cards. I didn't have one until after I graduated. I enquired with a sharia compliant home loan company about what would be required to get a loan, and they immediately asked about my credit history

So, I got credit cards and promptly ran up a debt paying for my paralegal cert. on them. Bah. We've managed to move that debt around to cards with no interest for the first year on balance transfer, blah blah blah, and are working our way out of (my) debt.

Once we're debt free on my cards, we're intending to only use them for automatic payments (cable, cellphone etc) and pay them off each month so we're not dealing with the interest.

My husband also has applied for his first credit card, and will be using it to make small purchases each month and paying it off right away, in order to build credit so we can get a house and a second car in the future.

So, at least in my experience, credit cards are a necessary evil, but if you use them wisely, you can avoid the interest.

If a spouse has issues with them, I suppose the compromise would be to only have a debit card, but then, no credit history being built. It's a catch-22. Any ideas on how to build the credit history without getting into riba?

[UmmSqueakster 54]

MHandMB, have you looked at some of "sharia compliant" home loan companies? They do some fancy dancing around interest and some scholars have endorsed them as "halal." I think overall, you end up paying more, but if it puts one at ease with their Rabb (Lord), it's may be worth it.

Labria

Guidance Financial - this is the one we have looked at (the one that asked about my credit score)

Edited August 3, 2006 by rahma

[Jenn! 918]

Does Islam also prohibit the earning of interest? How do people deal with saving for their retirement?

[UmmSqueakster 54]

I am not really convinced about the Islamic bankers home buying programs. I have read the fine print and it seems like the just change terminology to do the same thing. In fact, with a couple of the websites I checked, we would end up paying more than you would with a bank loan at the current interest rates! I think they are good in that they provide Muslims an alternative - but again, don't know if I personally consider it very different.

I have read pretty solid arguments that fixed-rate term loans are not what was intended by the riba prohibitions - that they were meant to avoid debts that could potentially never be paid back, where the rate changed, specifically where one party was taking advantage of another with loose terms (like loan sharks or credit cards where they can change your rates). However, it seems the common understanding is that riba applies to any and all interest, and this is definitely what my husband believes. He wants no part of any interest.

Not sure how you build a credit history without riba Is it possible?

Islamic economics is something on my list of things to investigate in the future. Since we're not going to be able to afford a house for many years, I suppose I have time I've heard many people who've looked into it say that it's more expensive as well. *sigh*

I'm not sure what zaharis/Ibn Hazm think of the interest=riba debate. That's what I get for marrying an independant minded man I'll have to ask him what Ibn Hazm has to say on the matter.

Does Islam also prohibit the earning of interest? How do people deal with saving for their retirement?

I believe receiving interest is a no no as well.

"islamic" mutual funds.

http://www.amanafunds.com/index.htm

The Amana Funds invest according to Islamic principles. Generally, these principles require that investors avoid interest (riba) and investments in businesses such as liquor, pornography, gambling, and banks. The Funds avoid bonds and other fixed-income securities. The Funds seek protection against inflation by making long-term equity investments. Of course, no mutual fund can guarantee that it will achieve its objectives.

The primary objective of the Growth Fund is long-term capital growth. It favors companies expected to grow earnings and stock prices faster than the economy. Growth investing offers greater opportunity for long-term gain, with a related increase in price volatility.

The Income Fund seeks current income and preservation of capital. It invests only in dividend-paying common stocks, which are expected to have more stable stock prices.

[Veiled Princess 1]

I'm not trying to build my credit history as I don't have plans to make my permanent home here in the states. We're going to save as much as we can while we're here with the hopes that once I'm able to relocate, we'll have enough to build a house in Libya inshallah.

With that being said. I don't have any credit cards or savings accounts and I don't have a problem getting along. I do have a checking account but it doesn't bear interest. I actully have two... one I use as a savings because they don't offer a non-interest bearing savings account at my bank. I have a Visa checkcard which can be used in any situation that would required a major credit card.

There is a muslim owned car lot here that offers on-site financing with no interest in case I need a car, although I'm perfectly happy with the car I own debt-free

I looked at one of those websites before to try to learn about "halal" interest but it just confused me.

[Bosco 1]

By many interpretations yes.

The whole thing is complicated and there are arguments on both sides.

Some say the stock market is acceptable, and different than banking - the stock market pays only when there is a profit, where as a bank gives (or takes) interest regardless of the circumstances. Others would say both are bad. Some would say bank interest is acceptable to collect because the bank gets a service from your money and thus it is payment rather than it being you are lending the bank money and charging interest.

Lately it seems the more widely accepted belief is that anything touching interest is wrong. Some go as far to say even if you have a no interest account in a bank it is still haram because the money is in a larger pool that collects interest, and the same would apply to credit cards paid before interest is accrued - you are dealing with a company that collects interest and that in itself would make it bad. I think this is an extreme POV personally.

Does Islam also prohibit the earning of interest? How do people deal with saving for their retirement?

[Jenn! 918]

Some go as far to say even if you have a no interest account in a bank it is still haram because the money is in a larger pool that collects interest, and the same would apply to credit cards paid before interest is accrued - you are dealing with a company that collects interest and that in itself would make it bad. I think this is an extreme POV personally.

Wow, I agree that is extreme. So some people actually keep everything they have in the form of cash somewhere in their home?

[Bosco 1]

Some go as far to say even if you have a no interest account in a bank it is still haram because the money is in a larger pool that collects interest, and the same would apply to credit cards paid before interest is accrued - you are dealing with a company that collects interest and that in itself would make it bad. I think this is an extreme POV personally.

Wow, I agree that is extreme. So some people actually keep everything they have in the form of cash somewhere in their home?

I don't think many adhere to this - but there are Islamic banks where you earn no interest.

Islamic banks give home loans and they call it "rent" instead of a loan and have a very complex structure. Reading it can baffle you. However, if you crunch the numbers, it really ends up being the same practice only with different terminology, and in fact, most Islamic banks charge more. You can read a little bit about it here if you are interested http://www.metloan.net/Islamic_financing/

[Katie 0]

With respect to the rent-to-own halal financing, does the IRS treat any part of the "rent" as interest and allow a home-mortage interest deduction?

I attended a Guidance Financial information session not long ago and came away thinking that it sounded like a traditional residential mortgage transaction by another name, especially when I learned how the monthly rent was to be calculated.

Katie

[Bosco 1]

With respect to the rent-to-own halal financing, does the IRS treat any part of the "rent" as interest and allow a home-mortage interest deduction?

I attended a Guidance Financial information session not long ago and came away thinking that it sounded like a traditional residential mortgage transaction by another name, especially when I learned how the monthly rent was to be calculated.

Katie

With Lariba, the largest Islamic bank in the U.S., you do get the tax benefit http://www.americanfinance.com/knowledge-c....htm#question12

More and more it seems no different than a bank loan.

Here is an article about Islamic banking from the WSJ

http://homes.wsj.com/buysell/mortgages/20030320-frangos.html