Q: Is interest on a savings account haram?

I keep money in a bank. What does the bank give me for it? Interest: a set rate on my balance, and my money is guaranteed Haram · Riba · Qur’an 2:275. A bank deposit is a loan to the bank: it may use the money and must repay it in full. Any interest promised on a loan is riba, whatever it is called. This covers savings accounts, fixed deposits and interest on current accounts. Keep money in a current account that pays nothing, or in a profit-sharing account at an Islamic bank. Interest already paid to you should be given to the poor, not used yourself. Nothing: my money sits in a current account, repayable whenever I ask Halal · A loan · Qur’an 2:279. Your deposit is a loan to the bank, repaid in full whenever you ask, with nothing added. That is allowed. Services that come with the account, such as a card or statements, are fine. Cash or gifts paid because of how much or how long you keep money in the account count as interest. Welcome offers made to every new customer do not. A share of real profit, and my deposit can shrink if investments lose Halal · Partnership · Mudaraba. This is an investment, not a loan. The bank invests your money and takes an agreed share of the profit as manager. You bear any loss the bank did not cause by negligence. The rate it advertises is only an expectation, never a promise. If the bank guarantees both your money and a fixed or minimum return, the account is an interest-paying loan, whatever its name. Profit comes only with risk.

Question 1

Is interest on a savings account haram?

Accepted Answer

I keep money in a bank. What does the bank give me for it?

Interest: a set rate on my balance, and my money is guaranteed
Haram · Riba · Qur’an 2:275. A bank deposit is a loan to the bank: it may use the money and must repay it in full. Any interest promised on a loan is riba, whatever it is called. This covers savings accounts, fixed deposits and interest on current accounts. Keep money in a current account that pays nothing, or in a profit-sharing account at an Islamic bank. Interest already paid to you should be given to the poor, not used yourself.

Nothing: my money sits in a current account, repayable whenever I ask
Halal · A loan · Qur’an 2:279. Your deposit is a loan to the bank, repaid in full whenever you ask, with nothing added. That is allowed. Services that come with the account, such as a card or statements, are fine. Cash or gifts paid because of how much or how long you keep money in the account count as interest. Welcome offers made to every new customer do not.

A share of real profit, and my deposit can shrink if investments lose
Halal · Partnership · Mudaraba. This is an investment, not a loan. The bank invests your money and takes an agreed share of the profit as manager. You bear any loss the bank did not cause by negligence. The rate it advertises is only an expectation, never a promise. If the bank guarantees both your money and a fixed or minimum return, the account is an interest-paying loan, whatever its name. Profit comes only with risk.

Question 2

What should I do with interest the bank already paid me?

Accepted Answer

Do not use it for yourself. Give it to the poor or to a public good without expecting reward, and ask the bank to stop paying interest or move to an account that pays none.

Question 3

Is a current account that pays nothing halal?

Accepted Answer

Yes. Your deposit is repaid in full with nothing added. Free services that come with the account, such as a card or statements, are fine. Cash bonuses tied to how much or how long you keep money there count as interest; a welcome gift offered to every new customer does not.

Question 4

Is a fixed-term deposit halal if the rate is called “profit”?

Accepted Answer

Not if your money and a fixed or minimum return are both guaranteed. That is an interest-paying loan under another name. A real profit-sharing account can pay less in a bad year and can lose money.

Question 5

Are Islamic bank profit-sharing accounts really halal?

Accepted Answer

They are if the bank invests your money as a manager and pays you an agreed share of actual profit, with you bearing losses the bank did not cause. The advertised rate must be only an expectation, never a promise.

Question 6

Can I use interest money to pay tax or bank fees?

Accepted Answer

Not bank fees or any other charge for a service you use, because that is still your own benefit. On paying taxes with it, Hanafi fatwas differ, so ask a scholar personally before doing so. The safe course is to give all of it to the poor.

Question 7

Can I give interest money to poor relatives?

Accepted Answer

Yes, to relatives who are poor enough to receive zakat, but not to anyone you are obliged to support, such as your own children or parents. It does not count as your zakat, and you give it expecting no reward.

Question 8

My salary is paid into an account that pays interest. Is my salary haram?

Accepted Answer

No. The salary is yours and halal; only the interest is the problem. Move to an account that pays no interest where you can, and give any interest already credited to the poor without expecting reward.

Question 9

Do Islamic banks charge interest?

Accepted Answer

A genuine one does not. It pays savers a share of actual profit and finances homes and cars by a real sale, lease or partnership whose price never rises if you pay late. A guaranteed return is interest under another name, and the organised tawarruq often used for personal finance is not allowed.

Question 10

Is a savings account with prize draws halal?

Accepted Answer

No. Money the bank must repay in full is a loan to the bank. Prizes drawn among depositors are a benefit paid to the lenders and handed out by lot: riba with an element of gambling, as with prize bonds. Choose an account that pays nothing, or a genuine profit-sharing one.