Is an overdraft fee regarded as interest or not ?


i have a Barclays account with an overdraft limit of 1000 pounds. Yesterday I didn't realize but I went over that limit due to some payments coming out. I realized today and cleared it. But as I went over Barclays will charge me 1.50 - each day I am over that limit. I was only over by one day so will have to pay 1.50. I called them and they said its not interest but a charge they have for going over the overdraft limit. Is it considered interest Islamically?


الجواب حامداً و مصلياً


In the scenario described, one would need to see the terms of the agreement, to give a conclusive answer.

In general terms it should be noted that the ruling also depends on, whether the said fee only covers the actual administration costs involved for providing the service and whether it is a fixed service fee irrespective of how much one gets overdrawn, for the charge to be perhaps considered as an administration fee and not interest.

However, if the fee was more than the actual cost involved for providing this service or the fee varies with the amount that is overdrawn, e.g. the more one is overdrawn the greater the fee one would need to pay back, it would in this scenario, appear to be in the ruling of interest.

413/7 حاشية رد المحتار

كل قرض جر نفعا حرام قوله: (كل قرض جر نفعا حرام) أي إذا كان مشروطا كما علم مما نقله عن البحر...

And Allah knows best.

Answered by FCB Fatwa Department