Is the cash equivalent fee charged when sending a remittance from a credit card Islamically valid, or would it be considered interest?
Bismillahi Ta’ala
Walaikum Assalam Warahmatullah
Since you have provided the information from PC Financial MasterCard, I have used the information from President’s Choice documentations itself.
PC Financial MasterCard Disclosure Document states that the Cash Equivalent Transaction fee is charged per wire transfer, money order, traveler’s cheque, permitted betting and purchase of lottery tickets and casino gaming chips.
and
“Cash-Like” refers to certain transactions charged to your Account which are identified to us by the merchant as being similar to a cash transaction and the Fee for “cash equivalent transaction” applies to these transactions. This Fee and the types of transactions for which it may be applied are listed in the Disclosure Summary or in other notices that we may provide to you. Currently these transactions include: wire transfers, money orders, traveller’s cheques, permitted gaming, and purchases of lottery tickets and casino gaming chips.
[1]
This means just like other service fees on the card, these specific transactions which are termed as “Cash Equivalent Transaction” or “Cash Like” transaction set the fee charged at this rate.
Mufti Maaz Saheb had penned an interesting fatwa under Mufti Ebrahim Desai Saheb rh. exploring the different reasons for service fee under a credit card transaction.
The upshot of the research was that the service fee being charged is to adequately value multiple service charges in an consolidated amount that can be charged as one.
This suggests that the fee is in lieu of actual services, albeit, ambiguous due to a portion of it being in percentage. However, the norm of the market adopting it as suitable evaluation for the charges is sufficient for Shari’ah to accept it as permissible charge.
[https://askimam.org/public/question_detail/35776]
While this answer is being given, we also urge you to review your bank’s policy and get full confirmation from your bank about “Cash Like” transaction. It is quite possible that some of these transactions get treated as “Cash Advancement” and incur an interest which may show up as a interest charge on the following months statement.
Wallahu A’lam
And Allah Ta’āla Knows Best
Mufti Faisal al-Mahmudi
https://mrslesieur.weebly.com/uploads/2/4/5/2/24526936/pcfmastercarddisclosureen.pdf
[2] https://www.pcfinancial.ca/en/learning-hub/blog/3-important-things-to-know-about-cash-advances/