Check cashing transactions

2-8-2004 | IslamWeb

Question:

Check cashing business is a common business in USA which consists of several types of transactions. Two of them are as follows:
- A customer comes with a check which the funds are available in the bank right away. The business then gives him the same amount in cash minus 2%.
- A customer comes with a check but the funds won't be available until a period of time passes (i.e. 2 weeks). The business then gives him the same amount in cash minus 15%.
Which type of transaction is Haram? And why?

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Answer:

Praise be to Allah, the Lord of the Worlds; and may His blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions.

The transaction which subtracts 15% for cashing the cheque in advance of its time is forbidden, as it contains a form of Riba (interest) which is giving a loan for a period of time in exchange of an additional interest. So the business lends the amount of the cheque to the customer but subtracts 15% of the amount for the delay of the period in which the business gets the total amount.

But if the 2% percentage is purely for administrative expenses which are pre-determined, and it is not for cashing the cheque in advance of its time, then there is nothing wrong about this. This is considered as a permissible charge.

Allah knows best.