Investing in Certificates of Deposit and high-yield savings

Question

اَلسَلامُ عَلَيْكُم وَرَحْمَةُ اَللهِ وَبَرَكاتُهُ

Is it allowed to invest in Certificate of Deposits (CDs) or High Yield Savings Account?

— Mohammed, Danbury, USA

Answer

وعليكم السلام ورحمة الله وبركاته

A certificate of deposit and a high yield savings account are both accounts used for saving money wherein the bank returns the deposit with interest added to it, allowing one’s money to increase as it sits in the account. It is permissible to invest in such a savings account here in this country because the interest that a Muslim receives from the bank here is not ribā.

Interest is only considered ribā, thus decisively ḥarām, once all the conditions of ribā are established, and one of those conditions is that it is between a Muslim and another Muslim, or a Muslim and a dhimmī kāfir (a disbeliever whose wealth is protected). It is stated in Radd al-Muḥtār:

قال في الشرنبلالية ومن شرائط الربا عصمة البدلين وكونهما مضمونين بالاتلاف فعصمة أحدهما وعدم تقومه لا يمنع فشراء الأسير أو التاجر مال الحربي والمسلم الذي لم يهاجر بجنسه متفاضلا جائز

[The author] says in al-Shurunbulāliyah: and from the conditions of ribā is the `iṣmah (protection) of both goods being exchanged and them being guaranteed against damage, so the ` iṣmah of [only] one of them or the lack of its value is not a hindrance. Therefore, the trade of a prisoner or a businessman with the wealth of a ḥarbī or a Muslim who has not migrated [to a Muslim country] with the same type of goods with interest is permissible.

[Radd al-Muḥtār, Kitāb al-Buyū`, Bāb al-Ribā]

Since the disbelievers of this era are not dhimmī, rather ḥarbī, any excess of wealth received from them without cheating or deception is permissible. It is stated in al-Hidāyah:

لا ربا بين المسلم والحربي في دار الحرب لأن مالهم مباح في دارهم فبأي طريق أخذه المسلم اخذ مالا مباحا إذا لم يكن فيه غدر

There is no ribā between the Muslim and the ḥarbī kāfir in the Dār al-Ḥarb. Since their property is mubāḥ, then whichever way a Muslim takes it, he acquired permissible property as long as there is no treachery in it.

[al-Hidāyah, Kitāb al-Buyū`, Bāb al-Ribā]

Even though the interest is not ribā in such situation, it is impermissible to give a kāfir interest, unless a dire need is established, on the basis that it is not lawful to benefit the kāfir in his wealth. Tāj al-Sharī`ah Muftī ‘Akhtar Riḍā Khān mentions this situation of interest that does not classify as ribā and writes:

ہاں مسلم کو زیادتی ملے تو یہ جائز ہے اور مسلم کو زیادتی دینا اور حربی وہ زیادتی مسلم سے لے تو یے بھی اگرچہ سود نہیں لیکن مسلمان کو جائز نہیں کہ بلا ضرورت اور سچی مجبوری وحاجت صحیحہ شرعیہ کے بغیر حربی کو زیادہ دے کر نفع پہنچائے

Yes, if a Muslim receives interest, then this is permissible. However, for a Muslim to pay interest and a ḥarbī to receive it from a Muslim, then this is not permissible for a Muslim, even if this is not ribā, because he will be benefiting the ḥarbī by paying him interest without necessity, genuine difficulty or a proper shar`ī need.

[Fatāwā Tāj al-Sharī`ah, Kitāb al-Buyū`, Bāb al-Ribā]

In conclusion, it is established that the interest one receives from the bank through a savings account is permissible, and there is no harm in Muslims depositing their money in such accounts here in this country, and Allāh knows best.

Faqīr Salmān al-Nūrī · (May he be forgiven)

Verified by Muftī Zāhid Ḥussain al-Qādirī