It is my understanding (having talked with a vendor or two) that in a credit card transaction, the vendor can choose “regular (1 payment)”, “Tashlumim (multiple payments)” or “Credit” (multiple payments.
My understanding, under tashlumim the vendor fronts the loan and gets payments from the banks each month (depending on what they agreed). On the other hand, if the vendor chooses “Credit” they get all their money up front from the bank and the bank/credit card issuer fronts the money and charges whatever ribbit is involved.
My question is sometimes I’ve seen vendors in Israel, especially smaller shops charge up to a certain amount of payments as tashlumim (typically maybe 3-12 payments without ribbit), but if you ask them for more payments, (I’ve seen 4-36) the vendor will tack on ribbit. This seems to be a problem since they seldom have a heter iska.
On the other hand they have the option of selecting “credit” and the bank with the heter iska fronts the loan. Is my understanding of the system correct in that we need to be very careful of vendors with tashlumim if they charge ribbit?
What you are writing is correct, “credit” is payments to the credit card company, however they have a valid heter iska, therefore if you understand what a heter iska is, it is not a problem. With “tashlmim” it is payments to the vendor, and if he isn’t charging you any extra, then it is fine, otherwise it would be ribbis, unless you make a heter iska with the vendor himself.