January 23, 2008

Coinstar Machines: Fair Dealing or Decadent, Usurious Tools?

I WAS SCANNING The Rant's search logs this evening, looking for material for another Your Search Engine Queries Answered! survey, when my eyes stopped upon a fascinating query someone had entered: coinstar haram. From these two words, one can reasonably deduce what the questioner was asking: is the use of a Coinstar coin-changing machine, which charges users 8.9 cents per dollar of change converted, forbidden under the principles of Islamic finance, which prohibit the charging of interest?

The short answer is: I have no idea. I am, after all, a Roman Catholic. As a result, I am in no way qualified to judge whether use of a Coinstar machine is permissible under the Fiqh al-Muamalat. Thus, I would say to my questioner that he ought consult his local religious authorities for their view of the matter, have them make a determination accordingly, and follow their guidance.

After all, there are two sides to the coin here -- do pardon the pun.

On one hand, the Coinstar people are performing a service for the customer: they take possession of the customer's coins, store them at the site, transport them elsewhere, and deposit them for safekeeping. One could argue that in providing the customer with a voucher he can then convert to paper money, the Coinstar folks are providing a necessary service, and are earning just profit through doing so. Particularly since -- let's face it -- if you're using the Coinstar machine, you probably need money pretty quickly, and at some weird hour of the night.

On the other hand, the Coinstar people are charging 8.9 cents per dollar to take your coins and change them into cash vouchers. In the quarter ending Sept. 30, 2007, Coinstar processed some $767 million in its coin machines, according to its 10-Q form on file with the SEC. Yes, that's right. $767 million. We can thus deduce that through doing so, Coinstar had revenues of about $68 million just from those charges it levied (provided, of course, its charges are uniform). Thus, one could perhaps argue these revenues are the product of interest, as Coinstar is charging its customers 8.9 cents per dollar because of the convenience, i.e., the time value of money, it offers to customers. (You can have your money now, and the company gains; or you can wait until the morning and change it somewhere else). This may be fine for decadent Westerners but not, perhaps, for observant Moslems.

As I said, however, I take no position on the religious implications of using a Coinstar machine. Such questions are clearly best left to others. I would note, however, that these questions may be avoided entirely through going to one's local bank and using their coin-changing machine, as many banks offer coin-changing services free of charge. Not only does that leave you free of any spiritual guilt, it leaves you 8.9 cents per dollar richer. And that adds up.

(CLEAR-AS-MUD FOLLOW-UP: If there is a charge at your bank, it may be so low as to actually qualify as a pure service -- if the charge is so low as to simply represent the cost of the machine and its operation. For instance, my local credit union charges just three cents on the dollar to change coins, and I figure that probably pays for having the coin-counting machine in the lobby and someone to empty it each night. I am pretty confident my credit union is not making money on the thing, which looks expensive. However, I am not sure that is the case. Further, as this whole digression is opening up another can of worms, I would caution my questioner and my Moslem readers that the answers to these questions are best served through obtaining spiritual counsel).

Posted by Benjamin Kepple at January 23, 2008 10:55 PM | TrackBack
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