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Information on Credit Cards
Information on Credit Cards

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ARE CREDIT CARD REWARDS TAXABLE?

Credit Card Companies would do anything these days to lure a customer into buying a Card. And from what they say and offer, it seems like it is a win-win situation for the cardholder, but you must do an in-depth analysis before signing up for it. You may not realize but there are downsides to owning credit cards; while the most obvious is falling into a debt trap, you could also land up in a tax fraud. The billion dollar industry has started offering tons of discounts, cash-backs, gifts, coupons etc. to attract customers. However, one may not realize all these rewards may be taxable and if not paid for, may attract penalty and jail time.

One should go through the terms and conditions of the credit card before accepting. The companies usually put information like which rewards are taxable and which are not in their legal documents. The free air miles, the discounts, the sign-up bonuses, the rebates etc are non-taxable. The gifts on sign up or special occasions may be. The rewards that constitute ‘Income’ are taxable and they are very few and rare. However, in case of doubt, one must always look for an expert opinion from a tax professional.

ARE CREDIT CARDS HARAM?

There is huge roar about credit cards being ‘Haram’ or not in the Muslim Community. The solution to this problem is not one word yes or no. Many are of the view that Credit Cards involve ‘Riba’ and are therefore Haram. ‘Riba’ means an amount charged on principal used. They also say that the longer we take to repay the credit card amount the higher is the interest. And the Quran is very explicit when it comes to interest, it is Haram.

There are also others who consider buying through a credit card is similar to buying from a merchant and paying at the end of the month. If you never miss a payment, no interest is charged and hence it is not Haram. The interest is charged on the amount due at the end of the month, if you clear your bills every month there is no concept of Haram being involved.

The contradictors say that the future is unforeseen and you can never be sure of making good the payments in case you lose your job or die. However, if one plans well and is managing finances with sheer care and concern, Credit Cards are not Haram. These are the some of the conveniences of modern living which everyone needs in order to survive in today’s world.

CAN CREDIT CARD DEBT BE DISCHARGED IN BANKRUPTCY?

UAE has recently been in talks for bringing a new Bankruptcy law into force. There have been meetings for dealing with the problems of the debtors and creditors in case of filing bankruptcy. The Bankruptcy Law, for now, states that Credit Card Debts will be discharged in case of insolvency. However, there are many steps before you file for bankruptcy. One should make sure they are completely broke before declaring themselves so because the misuse of the bankruptcy law amounts to a criminal offense. The violators are jailed for up to 5 years and fined up to AED 1 million.

One can easily contact the credit card companies and downsize their installments or extend tenure to pay off the debt. Negotiating the debt is also a viable option. Declaring bankruptcy might seem an easy option since it waives off every liability but it takes way too long for them to start a life again since every single thing is sold. Furthermore, insolvency stays for a few years before you can start your life.


Latest Activity: Feb 12, 2018 at 3:27 AM


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