Introducing Credit Cards
One of the adopted strategies by the Central Bank of Iran for facilitating the time-consuming and expensive processes of short-term bank loans and preventing the existing deviations in using loans is using credit cards based on Murabaha (Mark-up) contracts. According to this process, bank loans are first given to the applicants as a credit and in form of a credit card and the card holders can make purchase of goods and services.
As long as the credit card is not used, card holders have no commitment towards the bank.
When the credit card is used which causes a commitment for its holder, settlement would be possible two ways as follows:
- Cash settlement of debts in a deadline of at most 37 days after the issuance of credit card.
- Settlement of debts via giving loan to the card holder based on mark-up contracts.
In case there is a request by a customer for instant repayment of Murabaha loan, the deadline for settlement is at most in 12 months. In addition, if a customer requests to pay back Murabaha loan on installments, the deadline for such settlement is at most 36 months.
The deadline for using the credit card is based on the cards expiry date (currently two years). However, the settlement maturity for repaying the loan can be even lengthened after the expiry date of the card.
Credit card has a cycling feature which means by repaying the debt up to the maturity, the amount of debt which is equal to the debt base is added again to the credit card.
Regulations concerning the issuance and using Credit Cards
Everybody in the legal banking network is permitted to apply for credit cards with maximum amount of 500 million Rials.
Each customer is allowed to receive just one credit card from each bank and receiving a variety of credit cards from different banks which depends on observing the maximum amount of credit card (five hundred million Rials).
The remained credit of a card can just be used for purchase of goods via POS and Internet Electronic Portals and other transactions such as cash withdrawal, funds transfer, etc. via this card are not possible.