One day Mr. Oshri was approached by his neighbor, Mr. Leibowitz, who ran a small business from his house. “Is there any way that you can lend me $5,000 for a month or two?” Mr. Leibowitz asked.
“I don’t have $5,000 now,” replied Mr. Oshri, “but I expect to have in two weeks. Can you wait?”
“I need the money now,” said the neighbor. “If you’re willing, though, I can swipe your credit card through my business for $5,000. I’ll get the money in a day or two, and in two weeks you can make your monthly payment to cover it meanwhile.”
“I’m okay with that,” agreed Mr. Oshri. Mr. Leibowitz swiped the card for $5,000.
Another neighbor, Mr. Fuchs, similarly approached Mr. Oshri for a $1,000 loan.
“I don’t have available cash,” said Mr. Oshri.
“I’m desperate for the money,” said Mr. Fuchs. “Can you take a cash advance from your credit card?”
“I can, but it’s very expensive,” said Mr. Oshri. “There’s a four percent fee for the advance, and then a two percent monthly interest payment until the advance is repaid.”
“I have no choice,” said the neighbor. “I’ll cover whatever it costs you!”
Mr. Oshri took the $1,000 cash advance.
A month later, Mr. Leibowitz came to return the loan. “I actually only got $4,900,” he said to Mr. Oshri. “I have a two percent processing fee whenever I swipe a credit card. I’m happy to pay you $5,000, though, if there’s no ribbis prohibition.”
“They billed me $5,000!” replied Mr. Oshri. “I don’t see why there should be a problem!”
At the same time, Mr. Fuchs came to return the $1,000. He wanted to pay Mr. Oshri the $40 cash advance fee and also $20 of interest that accrued during the month.
Mr. Oshri suddenly wondered whether that entailed ribbis, since Mr. Fuchs was returning more than he borrowed. He approached Rabbi Dayan and asked:
“Is there an issue of ribbis in either case? How much must the borrowers return?”
“There is a fundamental difference between the two cases,” replied Rabbi Dayan.
“There is no violation of ribbis for expenses associated directly with procuring or granting the loan. For example, the Mishnah (B.B. 167b) teaches that the borrower is responsible for the cost of writing the loan document” (C.M. 39:17).
“Thus, an actual cost or expense, such as the legal fee to draft a loan document or a wire transfer fee, can be charged to the borrower. The mitzvah of providing a loan does not require you to expend money to grant it” (Bris Yehudah 9:1-5; The Laws of Ribbis 4:1-4).
“You were billed $5,000 for the swipe, which is the amount you made available and lent Mr. Leibowitz. The two percent fee that the credit card company charged him and deducted from the $5,000 is considered a cost in procuring the loan.
“Similarly, in the second case, the initial four percent fee for withdrawing the cash advance can be forwarded to the borrower, whether it’s a flat fee or percentage of the cash advance. However, the subsequent interest payment to the credit card company is not a cost in procuring the loan but rather interest that you, the card holder, owe the credit card bank for the money that you borrowed from them.
“Interest payments to a non-Jew for which the Jewish lender is liable may not be ‘passed on’ to the borrower. This is not a cost in granting the loan; it results from the delay in repaying the issuing bank. You are not allowed to take the $20 even if Mr. Fuchs agrees to pay it” (Y.D. 168:17; The Laws of Ribbis 4:5; 17:15-19).
“Had you drafted a valid heter iska,” concluded Rabbi Dayan, “you could collect also against the interest amount to the credit card company, especially if the cash advance was granted for business purposes.”
Verdict: One-time fees charged for use of a credit card can be passed on to the borrower, but not subsequent interest payments, without a valid heter iska.