Credit Card Fees in Halacha: An in-depth explanation

Hi,Is there a problem with regard to ribis to pay credit card fees to the company, since it may be considered as paying the company to give me a loan?

Thank you for your question.

The answer:
 With regard to paying the credit card fees, there is no issue of ribis.

The answer explained in depth:

The halachic status of credit card companies:

As we know, there are three types of guarantors:

1. The standard guarantor for the debt, called Arev Stam.
2. Arev Kablan.
3. Arev Shluf Duts 

The first two types of guarantors give the lender the right to claim the money from the guarantor. However, the third type of guarantor, the Shluf Duts, means that the lender claims the money exclusively from the guarantor.

Therefore, based on this, we regard the Shluf Duts guarantor as the borrower of the loan, who then lends it to the actual borrower.

Based on the above, it would be forbidden for the borrower to pay a friend to sign for him on the loan contract as a Shluf Duts, since it would be considered as paying the guarantor money in exchange for lending him the loan.

So, as we analyze the status of the credit card company, we can assume that they are like a Shluf Duts guarantor, since they are the ones actually paying the seller on your behalf and then loaning you that money to repay later.

Therefore, one can ask: how is it permissible to pay the monthly fees to the credit card company, since this should be considered as paying the lender to loan you money?

One could argue that the payment to the company is not for the actual loan, but rather that the company charges these fees to cover their expenses.

However, the Mordechai (Tractate Bava Metzia, siman 316) writes that in a case where one pays a lender money, and it could be explained either as covering expenses or as payment to receive a loan, it is prohibited to pay the money, since it can be assumed that it is being paid in order to receive the loan.
 This chiddush of the Mordechai is brought le’halacha in Yoreh De’ah, siman 177, se’if 13, and is also cited by the Rema in Yoreh De’ah.

In Yoreh De’ah, siman 166, se’if 3, the Shulchan Aruch discusses a case where someone asks a friend to do two things: one, to teach his son, and two, to lend him money. He offers to pay the teacher his expenses for teaching his son. This would be forbidden, since it can be assumed that he is actually paying for the loan.
 We see from here that when a payment can be interpreted as being for a loan, it is prohibited.

Therefore, the same would apply with regard to the credit card company. Since it could be interpreted that one is paying the fees for the loan they receive, it should be forbidden, even if another explanation for the payment, such as covering expenses, is possible.

Hagaon Harav Amrom Fried, shelit”a, (Azamroh Lishmecho issue #287) writes that in the case of credit card fees, there are a number of reasons to say that the payment is solely to cover expenses and not in order to be eligible for a loan. Therefore, since this is clearly the case, it would be permitted.

The reasons are:

1. The fees are not at all based on the amount of the loan; rather, they are a fixed amount.
2. The fees are considerably lower than the percentage one would pay on a loan.
3. Even when one doesn’t use the credit card, the fees still need to be paid.
4. Even a debit card has fees, despite there being no lending of money involved.

Based on the above, since it is obvious that the payment to the company is to cover expenses and not for the loan, it would therefore be permitted to pay the monthly credit card fees.

However, with regard to paying interest in a case where one pays for a product in a single payment and then spreads the payment over time on the credit card, there would be an issue of ribbis. This would only be permitted if one has a heter iska and the intent of the loan is for a business investment.

Wishing you well.

Mordechai, Bava Metzia, siman 316

Shulchan Aruch, Yoreh De’ah 166:3

Shulchan Aruch, Yoreh De’ah 177:13

Rema, Yoreh De’ah 177:13

Hagaon Harav Amrom Fried, shelit”a Azamroh Lishmecho Issu # 287