An Islamic bank offering credit card which is free if you pay 100% every month. If you pay 20% per month they charge 1% profit on it and if you withdraw cash they charge 3% fees. My question is is this 1% or 3% they charge is interest or it will be consider as there fees. Please tell me if its right or wrong.

All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad is His slave and Messenger.

Fixing a percentage on the credit card is a form of forbidden Riba (usurious interest), whether the percentage is in return for the delay in repayment or called service or administrative fees, because the reality of this percentage is that it is a profit in return for the loan, which is forbidden Riba. Therefore, it is not permissible to issue such a credit card or deal with it.

The service fees should be a fixed fee that does not increase with the increase of the withdrawn amount. Any addition to the real cost is Riba, as per the Decree of the Islamic Fiqh Committee.

For more benefit, please refer to Fataawa 198793 and 84519.

Allaah Knows best.