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Are Overdraft Facilities in Bank Accounts Permissible?

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Question:

Are Overdraft Facilities in Bank Accounts Permissible?

 

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

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

 

The Answer:

If you withdraw more money than you have in your bank account, the extra money you take out after your bank balance reaches zero is called an overdraft.  An overdraft will allow you to borrow money through your current account.  You might request one from your bank or your account may automatically offer you an overdraft (with your agreement).

 

Hence, overdrafts are loans from the bank to the customer.  If the overdraft facility comes with a fee, such a facility will not be permissible as the fee is interest.  If the overdraft facility is free, it is permissible to avail of such a facility.

 

If one has an account with an overdraft facility which charges, one should deactivate or cancel such a facility or switch to an account which does not have such a facility.

 

And Allah Ta’ālā Alone Knows Best

Mufti Faraz Adam al-Mahmudi,
www.darulfiqh.com

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