Are bank fees and money-transfer fees riba?
Paying for a service is ordinary hire. A fee for running your account, issuing a card or sending money is for work done, not for lending you money. The line is crossed when a charge tracks the size or length of a loan, or when a currency exchange is delayed.
The guidance
My bank charges me. What is the charge for?
- A set fee for running my account, a card, or sending moneyHalal · Service feePaying an agreed price for a real service is ordinary hire. The fee is for the work, not for lending you money, so it is not interest.The OIC Fiqh Academy asks that money-transfer fees stay within the real cost of the service.
- Sending money abroad: it’s converted at today’s rate, then sentHalal · Exchange · AAOIFI 1The bank exchanges your money on the spot at an agreed rate, then transfers it. The normal day or two for the payment to arrive is ordinary banking, and the exchange itself was on the spot.
- A charge that grows with how much I borrow or how long I oweHaram · Riba · Qur’an 2:275Whatever it is called, a charge tied to the size or length of a loan is interest. Only the real cost of a service may be charged on a loan.
- I lock in a rate today for currency delivered weeks laterHaram · Riba · Deferred exchangeCurrencies must change hands on the spot. Fixing today the rate for an exchange that happens later is a forward deal, which is not allowed even to protect against rate changes.
People also ask
Is sending money abroad through Western Union or a bank halal?
Yes. The transfer fee pays for a service, and the currency is exchanged at the day’s rate before it is sent. The day or two the payment takes to arrive is ordinary banking; the exchange itself was on the spot.
Is a percentage-based transfer fee riba?
A fee for transferring your own money is a service charge even when it is a percentage. It becomes riba only when the “fee” is really a charge on money lent to you, tied to the amount or the time.
Can I lock in an exchange rate today for currency I receive next month?
No. Currencies must change hands on the spot, so fixing today’s rate for an exchange that happens later is a forward deal, which is not allowed even to protect against rate changes.
Is the spread on currency exchange riba?
No. A currency may be exchanged for another at any agreed rate, so a spread is simply the price, as long as both sides are delivered at once.
Related questions
All questionsThe four schools on riba
This guidance follows the Hanafi school as applied today by Mufti Taqi Usmani and the AAOIFI standards. Notes mark where the Maliki, Shafi’i or Hanbali schools differ. The four schools on riba →