Are Saving Accounts Haram In Islam? – Complete Guide

Reviewed by: Shakira Ahmed
Fact Checked by: Shahina Islam

Are Saving Accounts Haram In Islam?
Are Saving Accounts Haram

Savings accounts are the best and risk-free resources nowadays to deposit your money and get some profit by interest on deposited money. But for Muslims, it’s not that easy to do the same as non-muslims because they mystify that are saving accounts haram in Islam

Taking an interest is forbidden in Islam. it will be considered as riba which is haram in Islam but Muslims can deposit their money in Islamic savings accounts which are riba-free in Islamic saving accounts. so, Savings accounts are not haram in Islam.

 Let us examine whether savings accounts are haram or not by digging in depth about the above topic for our readers.

What Is A Savings Account?

A savings account, also known as a deposit account, is a type of financial account that allows individuals to store and grow their money with a financial institution.

The money in the account earns interest, which is a percentage of the amount deposited. A savings account can be opened with a bank, credit union, or other financial institution.

Are Saving Accounts Haram?

Savings accounts are generally seen as a reasonable investment option by many people. However, certain aspects of savings accounts can be deemed as being non-Halal or Haram, depending on the specific circumstances.

The most important principle to consider when it comes to savings accounts is Riba or interest. Islamic law prohibits Muslims from taking or giving an interest in money. Therefore, any savings account that pays interest or charges fees for withdrawing money is considered Haram.

However, certain savings accounts are considered to be permissible in Islam. These savings accounts are known as Islamic savings accounts and they are based on the principles of Shariah law.

These accounts do not involve any Riba and instead focus on other investments such as mutual funds, stocks, and bonds.

These investments are considered to be permissible in Islam as long as they are not engaged in any form of Gharar or Maysir. Gharar is a form of speculation and Maysir is gambling, both of which are considered to be Haram

What Is Haram Saving Account?

Conventional savings accounts are Haram saving accounts for Muslims because every bank gives interest to the depositor on their savings account in some percentage against the total deposited amount. According to Islam giving and taking an interest in money, are haram.

What Is An Islamic Savings Account?

Islamic savings accounts are a special type of savings account for Muslims who wanted to store their halal money as per Shariah laws.

Islamic saving accounts follow Shariah laws where bankers separate depositors’ money from others’ banks and don’t charge interest on transactions and also don’t give any interest in deposited money. 

Why Did Savings Accounts Consider Haram?

There are plenty of reasons that conventional savings accounts are considered haram in Islam. Some of the reasons for are Saving Accounts Haram in Islam are as follows:-

  1. Take an interest:- Normal banks charge some amount as a maintenance charge in savings accounts which is more like taking riba from depositors. From an Islamic perspective, they are considered haram.
  2. Give Interest:- Conventional banks give interest to depositors on their deposited money as a reward .which will also be viewed as riba in Islam.
  3. Invest in haram products:- For obtaining profit conventional banks invest depositor money into money markets sometimes they invest in companies that make haram products. The money generated by it will also be considered haram. 
  4. Earn Interest from Loan:- Normal banks give loans to people with some interest and earn interest money from them which is haram in Islam. 
  5. Adition of speculation element:- when bankers invest depositor money in money or the stock market they are under speciality effect whether they lose or gain profit. Speculation is haram in Islam so profit is earned from it. this is also one of the reasons to consider a savings account as haram in Islam Muslims

Islamic saving Accounts and Sharia rules

Islamic savings accounts, sometimes referred to as Sharia-compliant savings accounts, are created in accordance with Islamic law and uphold Islamic financial principles.

The payment and collection of interest, also known as riba, is forbidden by Islamic financial regulations. Islamic savings account customers often get profit or loss sharing based on the bank’s investments rather than interest on their money.

Savings accounts that adhere to Sharia law also abide by an ethical code that forbids banks from dealing in or collaborating with enterprises that contravene Islamic law, such as those that deal in alcohol, cigarettes, and gambling.

Islamic banks make money in different ways that adhere to Islamic financial principles rather than by charging interest. AER, or annual expected return, is the term used to describe how the profit made is distributed among the account holders.

Islamic savings accounts are open to all people, regardless of faith, even though they are made to function in accordance with Islamic law. Regardless of their religious affiliation, anyone with ethical requirements may find these tales appealing.

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Taxation Of Islamic and conventional saving account

Tax treatment of Islamic savings accounts has different factors the key being:

  • Depending on the specifics of the account and the tax regulations of the nation where it is based, the profit made on Islamic savings accounts in the UK may be subject to income tax.
  • Similar to conventional interest, the profit from Islamic accounts would count against the personal savings allowance.

Whereas, the Tax treatment of conventional savings accounts:

  • The interest produced on the deposited cash is not taxed in the UK because ISAs are tax-free savings vehicles.

Benefit Of Islamic saving Account

Benefits of Islamic Saving Account
Benefits of Islamic Saving Account

Opening an Islamic savings account offers various benefits, both financial and in line with religious views. Such savings accounts function on the basis of profit and loss sharing, which means they may give larger returns compared to ordinary savings accounts that offer interest. Instead of receiving interest, account holders receive a part of the bank’s earnings created by Sharia-compliant investments.

These savings accounts ensure that your money is invested in businesses that match Islamic principles and beliefs. These accounts adhere to an ethical rule that forbids investment in sectors including gambling, tobacco, and alcohol. This allows individuals to support firms that are in line with their moral and ethical convictions.

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Opening an Islamic savings account provides individuals with an alternate banking option that caters to their specific religious and ethical criteria. It allows for variety within the financial landscape and gives a chance to promote the growth of the Islamic finance industry.

How To Maintain A Halal Savings Account?

Muslims can open Halal savings accounts in the following ways:-

Open savings accounts in Islamic banks

There are certain Islamic banks available in the world where Muslims can store their money in halal ways in their Islamic accounts. 

Donate interest money to charity

If the bank pays you interest on your deposited money you can donate it to poor and needy people and can keep your account halal.

By opening a current account

Muslims can open a current account in place of a savings account whose Interest rate is very low and can be used as a savings account.

Difference Between Islamic And Conventional Savings Accounts?

When it comes to savings accounts, conventional banking is based on the concept of receiving interest (riba) in return for depositing money.

This means that the customer is rewarded for their deposit and the bank can generate profits from the interest payments.

However, in Islamic banking, this concept is not allowed as it is considered usury (riba) and is therefore forbidden in Islamic jurisprudence.

Islamic savings accounts are designed to comply with Sharia law, and as such, there are some key differences between conventional and Islamic savings accounts. 

  • Firstly, Islamic savings accounts do not offer any interest payments. Instead, Islamic savings accounts reward customers through profit-sharing, whereby the customer and the bank share any profits generated from the use of the customer’s deposit. 
  • This ensures that any profits are distributed fairly and that the customer is not being rewarded for simply depositing their money.
  • In conventional banking, the customer is generally able to access their money whenever they wish. However, in Islamic banking, funds are often tied to investments, and customers may not be able to access their money immediately. This is to ensure that the bank is not engaging in any form of gambling or may.
  • In addition, Islamic savings accounts are also subject to certain restrictions on investments. This is to ensure that the bank is not engaging in any form of gharar (uncertainty). Gharar involves investing in activities that are not clearly defined and involve a high degree of risk. 

Therefore, Islamic savings accounts are often limited to investments that are considered to be Halal (permissible) by Islamic jurisprudence.

Are Saving Accounts Haram In Islam?
Are Saving Accounts Haram

How Does Islamic Savings Account Works?

Islamic savings accounts are based on the principle of profit sharing, which is a form of Islamic finance that involves an investment between two parties. One party provides capital and the other party provides labor.

The profits and losses of the investment are shared between the two parties according to the terms agreed upon. This form of finance does not involve the payment of interest, which is prohibited in Islam.

Are Saving Accounts Haram in Islam

To be considered Islamic, the savings account must be Sharia-compliant, which means that it must meet certain criteria outlined by Islamic scholars.

These criteria include avoiding certain investments such as non-halal investments, investments with high levels of gharar (uncertainty), and maysir (gambling). Also, the returns from the account should not be based on interest, but on profit sharing.

Read Also:-

Is Forex Trading halal Or Haram In Islam

What Say Fatwa On Savings Account

(Fatwa:26/46/D=1/1438) interest money from saving accounts should be given in charity to the poor and needy ones without the intention of reward. You did the same. Your food or income is neither haram nor there is a problem with it.

 However it is makruh to open a saving account unnecessarily, but it is lawful at the time of need or due to business purposes or for the intention of safety, and in such cases, it is allowed to open the saving account means saving account aren’t haram in Islam.

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Saving Account As Per Muslim Scholars

Ibn Qudaamah (may Allah have mercy on him) said: Based on Qur’an Sunnah, all types and forms of riba are forbidden, whether it is additional to the amount that was originally lent, or an addition to the amount stipulated in the contract along with a guarantee that the capital will remain intact. 

As that is the case, then interest asked which is mentioned in the contract when depositing money in the bank’s saving account is a case which is a loan with interest, and comes under the heading of riba-al-fadl or riba al-ziyaadah, as the fuqaha’ call it. It is haram in Islam.

What To Do With the Interest Gained In My Savings Account?

So, what should you do with the interest earned in your savings account? If you are uncertain about the status of your account, the safest option is to avoid using it.

Instead, you can consider investing in Sharia-compliant investments that do not involve riba or excessive risk (such as gharar and maysir). These investments have been designed to comply with Islamic law and generate returns without violating any of its principles.

What Is Riba In Islamic Law?

Riba, also known as usury or interest, is a type of transaction prohibited in Islamic law. It is considered to be non-halal (or forbidden) as it is seen to be a form of unjustified enrichment.

Riba is defined as any increase in the principal of a loan or any increase in the amount due to a delay in payment. This includes any additional payment made or received due to a delay in payment or an increase in the principal.

Riba can be seen as a form of exploitation, as it involves the lender taking advantage of the borrower’s need for funds. This exploitation is seen as a violation of the Islamic principle of justice, as it places an unfair burden on the borrower. Riba is also seen as a form of injustice, as it creates inequality between parties.

The prohibition of riba applies to all types of financial instruments, including savings accounts. A savings account is a type of investment that earns interest, which is a form of riba.

Are Saving Accounts Haram in Islam

Are Saving Accounts Haram

Islamic finance requires that all investments are made without the expectation of a return or interest. Therefore, it is not permissible to invest in or open a savings account.

Are Saving Accounts Haram in Islam

In conclusion, Islamic finance prohibits the opening of savings accounts, as they involve the payment of interest, which is considered to be riba.

In addition, gharar and maysir are also prohibited under Islamic law, as they are seen as exploitative activities. To ensure that their investments are compliant with Islamic law, Muslims should seek out alternative forms of investments, such as mutual funds and Islamic bonds.

Non-Halal Investments

In general, a savings account that does not charge interest or involve any form of gambling is permissible in Islam. It is important to do thorough research and understand the terms and conditions of the account before making a decision.

It is also important to note that there are other investments that are permissible under Islamic law, such as stocks, mutual funds, and real estate. These investments have the potential to generate higher returns than a savings account and can be a good way to grow your wealth in a halal way.

Read Also:-

Is Lottery Haram Or Halal?

Gharar And Maysir

Gharar and Maysir are two concepts in Islamic finance that are closely linked to the discussion of savings accounts. Gharar is a concept of uncertainty in a contract or transaction, which is not permissible in Islam. In other words, it involves a situation where the parties involved do not know what the outcome of the transaction will be.

Maysir, on the other hand, is a form of gambling where one party hopes to gain something at the expense of another. Both Gharar and Maysir are seen as forms of exploitation and are not allowed in Islamic finance.

In terms of savings accounts, the risk of Gharar and Maysir comes from the fact that the customer does not know what the rate of interest they will receive on their account will be.

This is because the rate of interest is often determined by the bank and can change from time to time. As such, the customer does not know the exact return they will receive from the account and this can be seen as a form of Gharar or Maysir.

Are Saving Accounts Haram

Frequent Asked Question

Q1: Can Muslims Open A Saving Account?

Yes, Muslims can open savings accounts in Islamic banks to keep their savings account halal as per Shariah laws.

Q2: Is keeping Money In The Bank Halal?

Keeping money in a saving account is halal but earning interest on it is riba in Islam which is haram in Islam

Q3: What Are Islamic Saving Accounts?

Islamic banks are banks which are works as per Sharia laws means they cant Charge interest or give interest to the depositor to deposit money which makes it a halal saving account.

Q4:Which Banks Are Islamic Banks?

Following are some of the Islamic banks:- 
Islamic Development bank
The Institute of Islamic Bank
Darussalam bank 
Muslim co-operative bank
The Darussalam co-operative bank.

Conclusion

So, as per the above article that justifies the topic “Are saving accounts haram in Islam” It 

It clearly explains why and how savings accounts are not haram in Islam.

Muslims used savings accounts as means of the store of money in a halal way they earn interest on it and spent it on the needy and poor people it will be considered halal and they will be blessed by Allah. 

Mohammad Yasir

My Name is Mohammad Yasir and we have a team of Muslims who is learning and trying to get the best information about what is halal or not.

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