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Determinants of Attitude of Customers towards

Usage of Islamic Credit Card: A Study of

Graduate Students of Kolej Universiti Insaniah

Article · January 2014


1 49

2 authors:

Sani Yahaya Yusuf Haji-Othman Kolej Universiti Insaniah Kolej Universiti Insaniah 5 PUBLICATIONS 2 CITATIONS 26 PUBLICATIONS 5 CITATIONS


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European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.6, No.32, 2014 Determinants of Attitude of Customers towards Usage of Islamic Credit Card: A Study of Graduate Students of Kolej Universiti Insaniah Sani Yahaya* Yusuf Haji-Othman Kulliyyah of Muamalat, Kolej University Insaniah (KUIN) Lebuhraya Sultanah Bahiyah, 05350 Alor Setar, Kedah Darul Aman, Malaysia * E-mail of the Corresponding Author: saniytm@yahoo.com Abstract This study examines the factors that influence the attitude of customers toward utilization of Islamic credit cards among graduate students of Kolej Universiti Insaniah. The factors which are included in this study are perceived ease of use, perceived usefulness, knowledge on the Islamic credit card, financial cost and trust. The study adopts the application of the technology acceptance model (TAM) to capture factors which have impact on the usage of Islamic credit cards. The result from the regression shows that trust is the most significant predicting variable on the attitude to use Islamic credit cards with the 24.9% explanation on the variance. Three variables out of the five independents variables; trust, knowledge and financial cost jointly explained 40 % of the variance of attitude toward using Islamic credit cards. The remaining variables, perceived ease of use and perceived usefulness do not have a significant contribution in predicting attitude toward using Islamic credit card.

Keywords: Islamic Credit Card, Students, Usage

1. INTRODUCTION The Islamic credit card is a type of banking product offered by Islamic banks. It falls under card services as part of the five product categories offered by Islamic banks which include deposit, investment, financing, trade finance and card services. The Organization of Islamic Conference (OIC)’s Fiqh council defined credit card as “a document that a bank issues to a natural or legal person according to a contract between them. The card holder purchase goods or services from those who accept the card without immediate payment of the price. Payment is made from the account of the bank, who, afterwards, charges the card holder at a regular time intervals depending upon the terms of the contract and the situation”(Ayub, 2007) p. 380). The institution issuing the card does not charge the card holder any percentage commission on usage. Instead it receives a commission from the party accepting the card for payment (Ayub, 2007).

Many countries in the world provide the shariah compliant credit cards to their clients. Such countries include Saudi Arabia, Malaysia, Dubai and Pakistan. The shariah compliant cards are not based of interest but instead operate on the basis of ujrah or a service charge (Ayub, 2007). This means an annual fee charged from the card holders by the issuing banks. For example, AmBank Berhad offers Islamic credit card in Malaysia called Al-Taslif that was launched in 1992. It was considered as the first Islamic credit card in Malaysia. Considering the need for such a card gave the Bank Islam Malaysia Berhad a sort of encouragement to introduce its own card;

Bank Islam card (BIC)(Amin, 2012). The AmBank’s Al-Taslif is based on Bai’ al Inah concept which combined dual contracts; sale contract and deferred purchase contract. Similarly Bank Islam Malaysia’ BIC was based on three contracts; bai al inah (sale and buy back), wadiah (safe-keeping) and Qard al Hasan(Ayub, 2007;

Obaidullah, 2005). Among the advantages of Islamic credit card was the relief from the burden of interest and allowing its users to purchase goods and services within the permissibility of shariah and within the credit limit.

The use of the credit card further saves time and provides its holders with convenience and relief from queuing or traveling to the point of payment (Mansor & Mat, 2009)..

Islamic credit cards permit its holders to acquire items through the use of shariah compliant cards (ISRA, 2012), and at the same time retaining the flexibility and convenience associated with a normal credit card. Interest or riba is not permissible under Islamic banking and financial system; whereas normal credit card is riba-based and therefore, not in conformity with shariah principles (Mansor & Mat, 2009). Islamic Credit cards varieties includes classic credit card-i, Visa, Almusafir card-i, MasterCard, Diners Club, visa platinum, Gold master card-i and many others. These cards are essentially lines of credit that offered an opportunity to its holders, depending on the terms, spend certain allowable sum of money and settle at a later time either in monthly or full amount (Mansor & Nikli, 2005) It has been the major concerns for bankers to provide the need of their customers in a satisfactory manner. Therefore, the essential mission of bankers is based on the clients-product/service dimension. With the growing concern and demand for Islamic banking instruments and services around the globe, customers’ expectations on Islamic bank product and services are increasingly becoming noticeable (Mansour, Abdelhamid, Masood, & Niazi, 2010). The varieties of such services give the potential customers the possibility of choice.

145 European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.6, No.32, 2014 The choice according to Mansour, et al. (2010) would be influenced by both the specificities of Islamic banks and customers’ own preference.

Thambiah, Ismail, and Eze (2011)argued that Islamic banking scheme needed to develop and offer suitable products and services that satisfy customers’ needs in order to remain competitive in profitable banking industry. Islamic banking system in Malaysia has emerged as a competitive element connected to overall financial system, which has been established to compete with conventional banking system in order to better fulfill customers’ banking desires (Jamshidi & Hussin, 2013a). In line with this, Islamic banks have to provide relatively similar or even better services of which the card services was imperative.

2. BACKGROUND OF THE STUDY Considerable number of studies have been undertaken to examine the credit card usage among bank customers.

Such studies however, are skewed to conventional credit cards (Abdul-Muhmin & Umar, 2007; Blankson, Paswan, & Boakye, 2012; Kaynak & Harcar, 2001; Norvilitis et al., 2006; Warwick & Mansfield, 2000).

However, in the context of Islamic credit cards, very few studies have been conducted (Amin, 2012; Mansor & Mat, 2009). Even those limited studies in the context of Islamic credit card were hardly conducted on students of higher learning even though some studies reveal that University students represent an attractive segment of the customers for retail banks in many countries (Blankson et al., 2012; Fatoki & Chindoga, 2011).The few studies concerning Islamic credit card were carried out strictly in some selected states in Malaysia. For example, Kuala Lumpur was conveniently sampled for the study conducted by Jamshidi and Hussin (2013a). In other researches, the states like Terengganu and Kelantan were used as the case studies (Mansor & Mat, 2009). However, none of such studies has been done in Kedah and particularly on students. This study sets to fill the gap to investigate the factors influencing Islamic credit card usage among the students of higher learning. Considering that students of higher learning form a considerable segment of bank customers, as such, the factors influencing their attitude toward Islamic credit cards are worth studying. This study therefore, tries to add to the literature (few studies) by focusing on the factors influencing the attitude of customers (students) toward utilization of Islamic credit cards, but the study is limited to postgraduate students of Kolej Universiti Insaniah (KUIN), Kedah Darul Aman.

Banks generally utilizes all possible ways to retain their customers. In doing so, they have to provide their customers with needed services as well as provision of wide range of facilities to accommodate customers’ varied needs. Certainly, the provision of Islamic credit cards expands the operations of the bank and extent the benefit to the customers. It is therefore, necessary for Islamic banks to provide this facility. However, despite issuance of Islamic credit cards by different banks in Malaysia, the card usage is somewhat ignored by bank customers (Amin, 2012; Jamshidi & Hussin, 2013a). One of the key determinants of Islamic credit card usage is related to the attitude (Amin, 2012). To date, some of the factors that have been considered to have influenced the customers’ attitude toward the usage of Islamic credit card includes: attitude, financial cost, knowledge on the Islamic credit card, demographic items (Amin, 2012; Jamshidi & Hussin, 2013; Mansur & Mat, 2009). As mentioned earlier, the current study tries to investigate the influence of the variables; perceived ease of used, perceived usefulness, financial cost, knowledge of the Islamic credit card and trust toward utilization of Islamic credit cards by focusing on the students of higher learning and specifically among the postgraduate students of Kolej Universiti Insaniah, Kedah Darul Aman.


The current study employs Technology Acceptance Model (TAM). Some modifications are made to suit the need of the study. The dependent variable for this research is the customers’ attitude toward utilization of Islamic credit cards. The demographic factors included in this study, which are also considered as control variables are age, gender, program of study, faculty and country of origin of the respondents. The independent variables for this study are the factors that the researchers perceived as important in influencing attitude toward utilization of Islamic credit cards. Thus this study includes five independent variables which are perceived ease of use, perceived usefulness, knowledge on the Islamic credit cards, financial cost and trust. In this research, effort is made to see the effect and how influential these factors are to the attitude of customers toward utilizing Islamic credit cards and to find out which of these variables have the most influence on the customers’ attitude toward utilization of Islamic credit cards. The theoretical framework for this research is shown in Diagram 1.

–  –  –

Diagram 1: Theoretical Framework of the Study.

TAM is one of the most utilized models for studying acceptance of new technology (Al-Gahtani, 2001;

Fred D Davis, Bagozzi, & Warshaw, 1989; Sun, Goh, Fam, & Xue, 2012).The model suggests that when users are presented with a new technology, a number of factors influence their decision about how and when they will use it. TAM involves two primary predictors as the main determinants of the attitudes toward a new technology.

These are perceived usefulness (PU), which is defined by Davis (1989) as the degree to which a person believes that using a particular system would provide some benefits. (PEOU).Perceived usefulness (PU) is also defined as the degree to which a person believes that using a particular system would be free from effort (Davis 1989). In addition to the existing variable contained in the TAM Model, the current study incorporated other variables such as trust, financial cost and knowledge on the Islamic credit cards. Hence, the following hypotheses are


H1 Students’ perceived ease of use has a significant influence on their attitude toward the usage of Islamic credit cards.

H2 Students’ perceived usefulness significantly affects their attitude toward the usage of Islamic credit cards.

H3 Students’ trust has a positive influence on their attitude toward the usage of Islamic credit cards H4 There is a negative relationship between financial cost and the students’ attitude toward the usage Islamic credit cards.

H5 Students’ knowledge on Islamic credit cards has a significant influence on their attitude toward the usage of the cards.


Warwick and Mansfield (2000) examined knowledge of credit card users using a sample of 381 graduate and undergraduate students at one Midwestern Campus in United State of America. The analysis shows no significant difference between the sample and the rest of the students which means the sample was quite representative. The results revealed a gross ignorance among the students about the interest charge on their cards.

The students were reported as lacking knowledge concerning the financial information of the credit card. 71 percent of the students admit their ignorance concerning the amount of interest paid on the card usage. They paid high interest on the card unknowingly. About 43 percent of the them were reported to have multiple credits cards which could be responsible for their indebtedness as reported in the study conducted by Norvilitis et al. (2006).

Blankson et al. (2012) stressed that the number of the students possessing at least a credit card among US students was between 70 – 80 percent and on average, one student possessed three cards.

The literature reveals that college students’ usage of credit cards was on the rise (Blankson et al., 2012;

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