Understanding Money in Islam #

Cashback and interest are fundamentally different financial mechanisms, and their connotations in Islamic finance are distinct too.

Cashback is essentially a reimbursement scheme often used as a marketing strategy and employed by banks, online marketplaces, and other businesses to stimulate consumer spending and foster brand loyalty. The more you spend, the more cashback you earn – either as credit, cash, or reward points.

In other words, cashback is not ‘free money’, but rather a perk for making certain purchases. The cashback terms vary between providers and often require adherence to specific conditions, such as minimum spend requirements and maximum cashback limits.

Furthermore, cashback rewards operate differently, depending on which issuers you’re engaged in. Below is how cashback usually works:

1. Credit Card Cashback: Banks offer cashback rewards on credit card purchases, often focusing on specific spending categories such as groceries, fuel, dining, or online shopping. Cashback accumulates over time and is usually credited to the cardholder’s account or saved in a separate rewards account.
2. Debit Card Cashback: Similar to credit cards, some banks offer cashback on debit card transactions, directly crediting a certain amount or percentage of purchases back into the customer’s account.
3. Online Retailers: Platforms like Shopee, Lazada, Alibaba, Amazon, Walmart, and Target provide cashback rewards, typically in the form of vouchers, credit, or reward points, encouraging customers to make repeat purchases.
4. eWallet Cashback: eWallets such as GrabPay and FavePay collaborate with merchants to offer cashback rewards on purchases made using their platform. These rewards are credited to the user’s account for future use.

While cashback and interest might appear similar on the surface, their underlying principles are fundamentally different. Cashback, essentially, is a type of ‘discount’ or ‘rebate’ in a transaction, provided as a reward for prompt payment, while interest is an additional charge for borrowing money.

From an Islamic perspective, cashback is generally permissible (lawful) and viewed as a hibah (gift), provided the reward is genuinely a discount on a purchase, without any conditions or requirements that include prohibited (unlawful) elements. For example, a straightforward cashback program that returns a percentage of the purchase price in the form of cash, credit, or reward points without additional charges or hidden fees would be lawful in Islam.

However, if the cashback is guaranteed as part of a loan (qard) contract or debt-based transaction, it is deemed unlawful because any loan with promised benefits equates to interest (riba), which is strictly prohibited in Islam. The same applies to credit cards that charge excessive interest rates or hidden fees, even if they offer cashback. The same applies to cashback received through purchases of unlawful items, such as alcohol.
In conclusion, while cashback and interest both involve monetary transactions, they serve different purposes, operate on distinct principles, and hence are not equivalent. Interest is a charge for borrowed money, whereas cashback is a reward for prompt payment and customer loyalty.

Nonetheless, as enticing as cashback rewards may be, it’s crucial to practice financial responsibility. Spend wisely, avoid impulsive purchases, and always stick to your budget.
May Allah guide us to the truth and inspire us to follow, and may Allah reveal to us the falsehood and inspire us to avoid it.

References:

1. https://www.islamweb.net/ar/fatwa/468082/%D8%A7%D9%84%D8%AD%D8%B5%D9%88%D9%84-%D8%B9%D9%84%D9%89-%D8%A7%D8%B3%D8%AA%D8%B1%D8%AF%D8%A7%D8%AF-%D9%86%D9%82%D8%AF%D9%8A-%D9%85%D9%86-%D8%AE%D9%84%D8%A7%D9%84-%D8%A7%D9%84%D8%AA%D8%B3%D9%88%D9%82-%D8%B9%D9%84%D9%89-%D8%AA%D8%B7%D8%A8%D9%8A%D9%82-%D8%A8%D8%A8%D8%B7%D8%A7%D9%82%D8%A9-%D8%AF%D9%81%D8%B9-%D9%85%D8%B3%D8%A8%D9%82%D8%A9
2. https://islamqa.info/ar/answers/260196/%D8%AD%D9%83%D9%85-%D8%B9%D8%B1%D9%88%D8%B6-%D8%A7%D9%84%D8%A7%D8%B3%D8%AA%D8%B1%D8%AF%D8%A7%D8%AF-%D8%A7%D9%84%D9%86%D9%82%D8%AF%D9%8A-%D9%81%D9%8A-%D8%A8%D8%B7%D8%A7%D9%82%D8%A9-%D8%A7%D9%84%D8%A7%D9%89%D8%AA%D9%85%D8%A7%D9%86#:~:text=%D8%A5%D8%B0%D8%A7%20%D8%B1%D8%AF%20%D8%A7%D9%84%D9%85%D9%82%D8%AA%D8%B1%D8%B6%20%D8%A3%D9%82%D9%84%20%D9%85%D9%85%D8%A7,%D9%85%D9%86%20%D8%A3%D9%83%D9%84%20%D8%A3%D9%85%D9%88%D8%A7%D9%84%20%D8%A7%D9%84%D9%86%D8%A7%D8%B3%20%D8%A8%D8%A7%D9%84%D8%A8%D8%A7%D8%B7%D9%84
3. https://islamqa.org/hanafi/askimam/103358/is-it-permissible-to-use-cash-back-websites-and-to-buy-gift-cards-at-a-discount/
4. https://medium.com/@fikrmustanir/hukm-on-recieving-cashback-from-electronic-wallets-or-payment-wallets-eb6c1895bd94
5. https://sunnah.com/ibnmajah:2185
6. https://www.muftiwp.gov.my/en/artikel/al-kafi-li-al-fatawi/3612-al-kafi-1338-customers-agreeing-to-buy-defect-goods
7. Wahbah Al Zuhaili (2016), Tafsir al-Munir, Jakarta: Gema Insani., Page 57
   https://archive.org/details/tafsir-al-munir-karya-syeikh-wahbah-a-zuhaili/5_6118219018101850325/page/57/mode/1up?view=theater