If you’re a Muslim, you might be looking for a credit card and other financial goods that follow Islamic law.
The good news is that there are many cards available that take your religious preferences into account. These cards are shariah-compliant, do not impose interest fees, and provide Takaful coverage.
Best of all, you’ll discover that Islamic credit cards can still feature amazing cashbacks, perks, freebies, and discounts that offer better value for your money.
What is an Islamic Credit Card?
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A Shariah-compliant credit card, such as an Islamic card, can only be used to make halal purchases.
This would typically be relevant to the food and beverage sector. Islamic credit cards are not accepted at bars, restaurants, or any other establishment that serves alcoholic beverages or non-halal food.
How does an Islamic Credit Card work in Malaysia?
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As with other credit cards, payments are due on the specified statement date.
For Islamic credit cards, the credit card firm does not, however, charge you interest if you miss the deadline or do not pay the whole amount. Instead, it levies a charge or profit rate on the remaining balance.
This is due to the fact that the imposition of interest, or riba, is forbidden in Islam. That does not imply that no charges are present. Islamic credit cards do not do that; instead, they impose a fee or profit rate.
It also makes use of the Ujrah idea, in which a fee is paid in exchange for goods or services that cardholders are given access to.
What Distinguishes Shariah-Compliant Credit Card from Traditional Credit Cards?
Islamic law governs shariah-compliant banking, which includes having no interest.
Shariah-compliant banking does not engage in the practice of usury, which is the act of making money out of other money.
Wealth can be acquired through legitimate trade and investment in commodities or other assets, however businesses engaged in the sale of alcohol, gambling, cigarettes, or pornographic material are prohibited.
Shariah compliant financial instruments and funding are those that are arranged in line with Islamic law.
7 Best Islamic Credit Cards in Malaysia?
HSBC Amanah MPower Platinum-i
Image source: HSBC Amanah
- Minimum annual income: RM3,000/month
- Annual fee: Free; Supplementary fee of RM127.20.
- Interest Rate: 15% p.a.
The HSBC Amanah MPower Platinum-i, one of the more well-known Islamic credit cards in Malaysia, provides many perks that span a broad range of categories, including lifestyle, petrol, and even a reasonable balance transfer rate.
Get up to 2% cashback at Shell, Petronas, and Caltex stations when you spend RM2,000 or more overall (with a monthly cap of RM50). When you and your friends are planning your next road trip, that is a nice little sum saved!
If you spend up to RM2,000 every month on groceries at particular supermarkets like Giant, Tesco, AEON Big, and Mydin, you can earn an additional RM50.
If you’re a new credit card customer, you’ll also be able to take advantage of incredible savings with HSBC Amanah Balance Transfer plans.
Maybank Islamic Ikhwan Gold-i
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- Minimum annual income: RM2,500/month
- Annual fee: No annual fee
- Interest rate: 15-18% p.a.
The charitable component of this card, whereby Maybank will donate 0.1% of purchases to charity, is what makes it genuinely special. Mercy Malaysia, Islamic Relief Malaysia, and Islamic Aid Malaysia are the participating charities.
It is undoubtedly a good thing that both Muslims and non-Muslims may value.
Another unique perk is the opportunity to win a two-person Umrah vacation when you use your credit card to make a minimum purchase of RM200. Instead, non-Muslims can win a vacation package.
But that’s not all; this card also offers 5% cashback on gas and groceries on Fridays and Saturdays.
This card has average rates, charging 15% to 18% annually and there is currently no travel insurance available.
CIMB Islamic Platinum-i
Image source: CIMB
- Minimum annual income: RM2,000/month
- Annual fee: Waived for life
- Interest rate: 15-18% p.a.
The travel Takaful coverage up to RM1 million that is provided with this card may be of interest to frequent travellers.
When you consider that the minimal annual income requirement is simply RM24,000, this is a terrific value. Normally, basic cards are not given privileges like this.
Additionally, if paying yearly fees bothers you, you will adore this card because it has a fee waiver for life!
If you’re wondering what Islamic banking principles apply to this card, you should know that, like the majority of cards in Malaysia, it adheres to the ujrah principle.
It argues that, contrary to the traditional theories underpinning banks interest rates, charges imposed are intended to account for services supplied (e.g. time value of money, etc.).
BSN Gold-i
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- Minimum annual income: RM3,000/month
- Annual fee: Waived for life
- Interest rate: 11% to 17.5% p.a. (for card applicants working in government sector); 13.5% to 17.5% p.a. (for card applicants working in private sector)
With this card, government employees can take advantage of rates that are below average.
For qualifying government sector card applicants, the interest ranges from 11% to 17.5% annually, making it one of the lowest rates currently available. If eligible, even employees in the private sector might benefit from lower rates than the national average, with offers starting as low as 13.5% to 17.5% annually.
The low rates depend on you completing your payments on time, that is, before or on the due date.The minimum annual income criterion is a little bit higher with this card, at RM36,000 per year, but it is also free of yearly fees for life.
What about card advantages and gifts? When charging trip tickets to the card, cardholders would initially automatically obtain travel and inconvenience insurance coverage up to RM50,000.
Additionally, cardholders will receive a free BSN Zing PLUSMiles Card, be able to redeem presents from the BSN Happy Rewards Program, and take advantage of exclusive dining and travel savings from the Happy Privilege Program.
Bank Islam Gold Visa & Mastercard
Image source: Bank Islam Malaysia Berhad
- Minimum annual income: RM2,000/month
- Annual fee: RM130 for primary card; RM60 for supplementary cards
- Interest rates: 13.5% p.a.
Bank Islam Gold Visa and Mastercard is a solid choice for young adults at the start of their careers or users who are looking for a standard card. You can easily apply for this card as long as you meet the monthly income of RM2,000 and start building your credit score.
It is a good first credit card and offers all the standard perks of a Bank Islam card, which include rewards points, an annual fee waiver, and flexible payment plans at zero interest.
Plus, you also get a complimentary Group Family Takaful coverage and 40% exclusive discounts on will writing fees.
Compared to most credit cards with a minimum profit rate of 15%, the Bank Islam Gold Visa and Mastercard offer interest rates as low as 13.5%. This Bank Islam card is recognized worldwide, and you can perform emergency cash withdrawals while traveling overseas.
AmBank Islamic Al-Taslif Gold/Classic-i
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- Minimum annual income: RM2,000/month
- Annual fee: Annual fee waived for first three supplementary card; RM75 for fourth card.
- Interest rates: 15% p.a.
Due to its low RM24,000 minimum income criterion, this is a fantastic starter card for those who are just entering the workforce.
Every time a cardholder makes a purchase, they have the opportunity to accrue reward points (1 AmBonus Point = 1 RM spent). Branded cameras, electronics, high-end luggage, toys, perfume, luggage, cash certificates, and air miles are some of the redemption prizes that you can claim from your pool of reward points.
Additionally, there is no annual charge with this card because it is unconditionally waived for life. In actuality, only the fourth additional card would be assessed an annual price of RM75; the first three will all be free.
RHB Islamic Smart Value-i
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- Minimum annual income: RM2,000/month
- Annual fee: Free for life
- Interest rates: 15% p.a.
This card can spark your interest if you’re seeking reasonable cashback (up to 5%, capped) from daily spending on gas, food, utilities, retail spending, and online shopping. Get unlimited cashback of up to 0.2% on all other purchases.
Additionally, this card offers Takaful travel insurance coverage for you and your family up to RM 100,000. (spouse and children).
The one thing to keep in mind is that this card does have an annual fee after the first year of use of RM74.20 (including GST) unless you swipe a minimum of 12 times annually.
How to Avoid Paying Interest Rates?
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Most Important: Pay Off Your Outstanding Credit Card Balances!
The majority of credit cards, including Islamic credit cards, have a grace period that typically lasts at least 21 days beginning on the date of your monthly bill. You can pay off your entire outstanding balance throughout this repayment period without accruing interest on your purchases.
However, keep in mind that until the outstanding balances are paid off in full, you will lose your grace period on new purchases if you carry even a minor balance from one month to the next. This means that interest will begin to accrue on them right away.
Tips for Owning a Credit Card
These are rules that, if you go by them wisely, will enable you to benefit from credit cards’ advantages without having to cope with the difficulties they may otherwise cause.
1) Only choose affordable monthly installments
There are times when you would need to make big purchases such as getting a laptop or buying a fridge because your old one has broken down. One of the perks of owning a credit card would be being able to pay these purchases in monthly installments, where you can effectively manage your cash flow.
However, do keep in mind that you should not over-commit to monthly installments as little by little they will pile up.
2) Never use more than 30% of your credit limit
A credit limit is the maximum money you are permitted to spend on a credit card or line of credit by a lender. Knowing your limit, however, does not imply that going for it is a wise decision.
Use no more than 30% of your available credit in order to maintain a healthy debt-to-credit ratio. Being under 10% is preferable. The 30% rule applies as follows in a real-world budget: If you have a card with a RM1,000 credit limit, it’s advisable to never have a balance higher than RM300. You can always negotiate with the bank to increase your credit limit to tackle with this problem.
This factor will heavily impact your credit score, which bankers will take note when applying for car or house loans.
3) Never, ever be late with a payment.
Paying on time, each and every time is one of the fundamental tenets of wise credit card use. Although many people have the best of intentions, many just forget to pay off their credit cards on time.
Potentially while missing your deadline by a few days might not seem like a huge concern to you, credit card companies will act quickly to charge late penalties and even raise your interest rate, particularly if you have been late more than once.
4) Avoid using your credit card to simply get points.
It may sound appealing to use your credit card if you receive free airline miles, discounted car rentals, or redeemable points at different retailers. You may believe that it is one way for you to get the credit card company to pay you again. Wrong!
The odds are always in favor of the credit card companies, that is the truth. They are aware that using credit cards requires significant spending in order to accumulate a sufficient number of points that may be redeemed for actual cash. They also understand that you will inevitably fail to keep your outstanding balance at zero.
Finding the Right Islamic Credit Card for you
That’s the complete list of Islamic credit cards in Malaysia that were offered in 2022. Do note that all credit cards from the bank are Shariah-based and can only be used for halal transactions.
It’s also essential to consider how words like “free takaful coverage” might vary and how to avoid paying annual fees.
Hence, choosing the right Islamic credit card is really up to your monthly salary and if you are looking for more comprehensive takaful coverage, airport lounge access, or other benefits, do checkout the product disclosure sheet of each credit card.
