Interests

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salamu alaykum wa-rahmatullahi wa-barakatuh.

Brother in Islam,

Your concern to keep yourself and your family away from interest is a sign of your faith, and may Allah reward you for it.

In principle, interest is prohibited in two directions. It is not permissible to pay interest, which happens when one takes an interest bearing loan, and it is not permissible to receive interest, which happens when the bank credits a return on deposits. Living in Canada, the object is not to avoid banks altogether, since a bank account is a necessity here, but to use the banking system without paying or benefiting from interest.

Accordingly, we advise the following. First, keep your money in a chequing account rather than a savings account, and where the bank offers an account with no interest, choose that one. Several Canadian banks allow you to opt out of interest on a chequing account if you ask. Second, if interest is nonetheless credited to your account, you must not consume it or count it as your own wealth. It should be given away to the poor without the intention of reward, and it may not be used for your own expenses, taxes, or bank fees. Third, do not take any interest bearing loan, whether a mortgage, a car loan, a line of credit, or a student loan. A credit card may be used only if you are disciplined enough to pay the full balance before the due date every month so that no interest is ever charged. Fourth, for home financing and for investing your savings, use the Shariah compliant providers available in Canada, such as Manzil, EQRAZ, Servus Halal, and Shariah portfolio.  Fifth, teach your family these rules, because the protection of a household from interest is a shared responsibility.

It is important to note that money lawfully earned and kept in a bank does not become unlawful simply because the bank deals in interest. Your wealth remains yours and remains pure so long as you do not take interest on it.

Allah knows best

Mufti Mirza-Zain Baig