Dr. Monzer Kahf, Scholar in Islamic Economics & Financial Expert, states the following: “Any conventional bank certainly uses money deposited in it to its own benefit. However, these depos
its cost the bank money to maintain their accounts and transactions. Here, several points should be made clear:
1. If you are in a Muslim country and there is, at least one Islamic bank that provides services, generally of the same qualities as the conventional banks, at that Islamic bank is accessible to you without much additional effort and cost, (a little additional effort and cost is always tolerable), it is then haram to place funds with the conventional bank, whether in current deposits (that does not generate interest) or in timed deposits and saving accounts which generate interest.
2. If you are in a Muslim country that does not have an accessible Islamic bank, or in a Muslim community, as a minority, and there is no Islamic bank too, and if you need the convenience of having a bank account for the deposits of your income checks and the payment of bills and for safeguarding the funds, as our case here in the United States, we MUST first always make sufficient efforts to establish an Islamic bank that allows us to have the convenience we need without having to deal with a Riba-ridden business establishment (a conventional bank). This is a fard kifayah, i.e., all Muslims who are able to do it are required personally and each one of them is required by the Shariah to cooperate with others to establish such an Islamic banking institution. Those who don’t undertake this responsibility are sinful as long as they can do it and it is not yet done.
Until an Islamic bank is established, we are permitted, out of this general need that stands equal to individual necessity, to make necessary transaction with a conventional bank, and we keep our seeking the forgiveness from Allah. We keep our relation to the minimum amount that we need and if any interest comes out of such transaction, we MUST give it away for charity, preferably through the Islamic center, and we do not consider this giving part of our Zakah, nor it is a Sadaqah, it is in fact nor our money because interest is haram and it is not an earning to Muslim, we give
it away because we have to keep our own money pure from it.
3. If you can keep your money in a safety box without having to bear the inconvenience of needing to write checks and cashing checks of income and receipts and having salary transfers come directly to your account, and you are willing to make the payment of the fees of the safety box, you may then do that. However, you should remember that this is a serious inconvenience for most other Muslims, hence do not object to their having current accounts with these banks.”