Permissibility of different types of cashbacks

Questions For IFG/Mufti Personal Finance Questions
#1

Mufti Faraz gave a thought provoking example in our first class about cashbacks, particularly the ones you get through the bank if you pay a monthly fee. I never thought about this and I usually get my cashbacks through Quidco on retail purchases and I always thought of them as a discount.

Would the cashback you get from a bank in exchange for a monthly fee be considered riba? I am seeing it as Riba tbh, please advise.

The cashbacks offered to retail customers for doing business with the retailer through these cashback websites however is unclear to me, what would you say about them?

Finally, I have a credit card with Amex that offers cashback on purchases. I always pay my account in full and never allow the interest to kick in. What is your opinion on this type of cashback? I will ask about the permissibility of having an interest bearing credit facility in another thread insha’Allah

#2

Wasalam

May Allah bless you.

  1. Cashback you receive when buying something from a retailer is permissible. It is similar to receiving a discount.

  2. Cashback you receive from a credit card company for using their card, is also permissible. It is similar to having a debt reduction.

  3. Cashback you receive from banks in exchange of paying a fee, is not permissible. It is similar to buying money for money with an unequal amount. Hence, this would be classed as riba.

  4. Cashback you receive for keeping a certain amount in the bank accounts, or even by setting up a direct debit with them to pay the bills, are also impermissible in my opinion. In effect, the cashback is in exchange of a loan given to the bank i.e. depositing money in a bank account. In exchange of that loan, you are receiving an extra benefit which makes it impermissible.

The above might differ with @Mufti_Faraz_Adam’ opinion.

And Allah knows best!

Paid Cashback Site and purchasing discounted gift cards
#3

Salam Alikom,

Is option 2 includes paying higher credit card fees for cashback option ?

Thanks

#4

Wasalam

May Allah bless you.
In general not all the fees charged by a credit card company is impermissible. See example: Credit Card Annual Fees

If it can be demonstrated that a portion of the fee is related to the cashback option, then I would say it is not permissible.

And Allah knows best!

#5

Thanks and Jazzak Allah Khair