An Islamic card that combines kafalah and ujrah uses two contracts: kafalah is the issuer's guarantee that the merchant will be paid, and ujrah is the fixed fee the cardholder pays for the issuer's services. The structure aims to replace interest with a priced service, so that no charge grows with the amount or time of borrowing.
It is one of several designs used for Islamic cards, and boards differ on how far a fee may be connected to a guarantee. This guide describes the cash flows, the points of debate, the documents to read and the traps to avoid, with illustrative numbers only.
The two contracts and who does what
Kafalah: the guarantee
In kafalah a guarantor commits to answer for an obligation owed by another. On a card, the issuer guarantees to the merchant, through the card network, that payment will arrive. The cardholder then owes the issuer the amount the issuer paid on his or her behalf.
Ujrah: a fee for services
Ujrah is a wage or fee for a defined service. The cardholder pays it for issuing the card, running the account, processing transactions, statements and customer service. It must correspond to real work and be agreed in advance, rather than depend on the size of the debt.
Why separation matters
Many scholars object to charging a fee for the guarantee itself, because a guarantee is a favour and a fee linked to the amount guaranteed resembles a return on a loan. Combined designs therefore tie the fee to the services around the card, and describe the guarantee separately.
A worked cash flow
The example is invented and shows mechanics only. A cardholder has a limit of 3,000 and an annual service fee of 120, plus a monthly statement fee of 5. In one month he buys goods for 800 and the issuer settles with the merchant.
| Step | Event | Amount |
|---|---|---|
| 1 | Purchase at the merchant | 800 |
| 2 | Issuer pays the merchant under its guarantee | 800 |
| 3 | Cardholder repays the issuer the principal | 800 |
| 4 | Fixed service fees for the year | 120 + 60 |
| 5 | Total cost of the services | 180 |
What stays constant
If the cardholder repays 800 in one month or in six, the service fees remain the same. That is the main contrast with a conventional card, where the charge grows with time. If repayment in instalments is allowed, any extra charge must be explained by a service, not by delay.
Points of debate among scholars
The debate has two parts. The first concerns whether any fee may accompany a guarantee. Many contemporary boards accept fees for administrative services connected with the card, while rejecting a fee defined as a percentage of the guaranteed amount. The second concerns late payment, discussed below.
Late payment
Some boards allow a fixed penalty donated to charity to discourage careless delay, on the basis that the issuer does not keep it. Others reject any monetary penalty and prefer non-financial measures such as suspension of the card. The issuer should disclose the approach and who receives the amount.
Fee structure red flags
A fee quoted as a percentage of the outstanding balance, a fee that rises each month the balance stays unpaid, or a fee called a service charge but calculated exactly like interest are signs that the structure may not follow its stated principles. Ask the issuer how each fee is calculated.
How to read the contract before signing
- Find the clauses that describe the guarantee and the reimbursement duty of the cardholder.
- List every fee in the schedule and ask what service each one pays for.
- Check that the fees are fixed amounts and not percentages of the balance.
- Read the late-payment clause and the use of any penalty amount.
- Look for the Sharia board certificate, with its date.
- Calculate the total cost for a typical year of use and compare it with other issuers.
Who this structure suits
It suits cardholders who pay in full most months, want predictable costs and prefer fees that do not depend on the balance. It suits less well those who expect to carry balances for a long time, since a fixed fee model usually has limits on how much can be financed.
Mistakes, refusals and ways to avoid them
The main mistake is to read a low annual fee as the whole cost and ignore statement, replacement and foreign-currency fees. Another is to assume that guarantee means the issuer absorbs losses: the cardholder remains fully responsible for repayment. Declined applications often relate to documents, residency or income.
If your application is refused
Ask for the reason, correct documents, and wait before applying elsewhere. Consider a secured card, where a deposit supports the limit, or a prepaid card, which uses your own funds and does not need an approval of credit.
Halal alternatives to a combined structure
If the combination does not convince you, other approaches exist. A pure ujrah card charges only service fees. A qard card gives an interest-free loan on top of a service fee. A charge card requires settlement every month. A murabaha facility finances purchases on a fixed markup.
Comparing quickly
Ask each issuer for the same example: spend 1,000, repay in two months, and show every cost. Seeing the numbers side by side exposes differences that marketing language hides. Share the contracts with a scholar if any part is unclear.
Keeping records
Save the signed contract, the fee schedule in force on the date you joined and every notice of change. If a fee later seems to behave like interest, these documents let you ask the issuer and its Sharia board a precise question instead of a general one, and they help if you need to complain to a financial ombudsman.
Frequently asked questions on kafalah and ujrah cards
Does the issuer lose money if I do not pay? The issuer pays the merchant first and then claims repayment from you. You remain liable for the full principal and the contract's permitted charges.
Is ujrah just interest under another name? It should not be. A genuine ujrah is fixed in advance, linked to a real service and independent of the balance and the time. If it behaves like interest, raise the issue with the board.
Can the fee increase during the year? Only according to the contract's change clause, with notice. Fees that vary with your balance would be a warning sign.
Do all Sharia boards accept this combination? No. Many accept it with conditions, some object to fees tied to a guarantee. Confirm with the issuer's board and a qualified scholar.
Is it the same as a Qard plus Ujrah card? Related but different: here the guarantee is the centre, whereas a qard design focuses on the interest-free loan.