Wa alaykum salam wa rahmatuLlahi wa barakatuHu,
Regarding credit cards issued by conventional financial institutions, the cardholder agreements contain the stipulation that unpaid balances remaining on one’s statement will incur interest. Many scholars who deal with shari’ah-compliant financing consider that the stipulation of interest invalidates the contract. And signing up for such cards is impermissible. With this opinion, they do state that when there are no viable alternatives and one needs, then they may use such cards while being vigilant to pay off the card’s balances in order to avoid incurring interest.
The International Islamic Fiqh Academy has a resolution on credit cards: http://www.iifa-aifi.org/2055.html. Details on this are also located in their journal. And here is an answer from Dr. Muhy al-Din al-Qarahdaghi: http://www.qaradaghi.com/chapterDetails.aspx?ID=1386.
Mufti Taqi Uthmani mentioned that the stipulation of interest on credit card balances is unlawful. Furthermore, he mentioned that the scholars differ on whether one may agree to a credit card contract in which interest is stipulated with the intention that when balances are due, one will settle it in a way that avoids interest being applied. He related that some consider it impermissible to sign up. While others considered that if one knows they will be able to settle, and interest will never actually be applied, then it may be allowed. He continues on pointing out that similar conditions are widespread in contracts nowadays, even including things that most everyone signs up for like phone and utility bills. And when one signs up for these contracts, they intend to pay them before interest or financial penalties are incurred. This is something that has reached the extent of a public need. Thus, when one has a need to use such cards, it should be allowable for them to open one while taking precautions to not end up paying interest. (Fiqh al-Buyu’ 1/462-63)
And Allah knows best.
Answered by: Shaykh Yaqub Abdurrahman