Question
A and B are in Israel and B told his friend A, that he needs a thousand shekels to buy something at a store in Israel. A handed B his American credit card and B used A's card to pay the store. A gets his bill in dollars. What currency does B need to repay A-shekels or dollars? And how much does B owe A? Is it the 1000 shekels which he got, or the amount the credit card company charged A? Since they are in Israel and both would rather do the payment in shekels, which exchange rate should they use: the rate at the time of purchase or at the time of payment?
Furthermore, is there an issue of ribbis?
Answer
In order to answer these questions, we must first analyze what actually is happening from a halachic point of view.
When B used A's American credit with A's permission, what happened is that A told his credit card company to use his line of credit to give him the amount of dollars that he needs to buy something that costs a thousand shekels. The credit card company does not know about B, and in any case the one who is obligated both legally and halachically to repay the credit card company is A. Therefore, in essence A gave his money to the store to pay for the item B wished to purchase from the store.
What happens from a halachic point of view is based on the Gemara in Kiddushin (7A) and other places. The Gemara says that if X tells Y give money to Z that X will repay, then when Y gives Z the money, X becomes obligated to Y for the amount that Y gave to Z, even though X did not receive any money. The Gemara says that the source for this obligation is the law of a cosigner (din oreiv), which is a Biblical law.
The law of a cosigner is that even though a borrower – and not the cosigner – actually received the money, the cosigner is obligated to repay the debt of the borrower (under the terms of the cosigner's agreement). By signing as a cosigner, the cosigner told the lender to lend money to the borrower and if the borrower does not pay, then he, the cosigner, will repay the borrower's loan.
There is a major dispute among the Rishonim (See e.g., Machane Efraim (Ribbis 11) and Kehillas Yacov (Kiddushin 12)) about the nature of the obligation that the cosigner has towards the lender. The Rishonim do not discuss this issue directly but the Acharonim prove that many Rishonim, including Tosafos, Rosh, Tur, Rashbam and others, maintain that the Torah views what transpired as if the lender lent the money to the cosigner and the cosigner then lent the money to the borrower. The other approach, which is ascribed to the Rambam, maintains that a cosigner creates a new obligation on himself to pay the lender the amount that the latter gives to the borrower.
In our case effectively what happened is that B asked A to pay the store and he would pay him back. A complied with B's request since the money in our case came from A's line of credit and went to the store as per B's request. In the context of the above B is X, A is Y and the store is Z According to both approaches, B obligated himself to pay A the amount of money that A gave.
While the credit card company actually gave the store shekalim, nevertheless, since the credit card company only works with (pays and collects) dollars, the credit company really gave dollars and, as an additional service, they converted the dollars into shekels, since that is what A asked them to do. (That is also how the credit card lists this expense.)
Returning to your question whether there was a dollar loan or a shekel loan, i.e., whether B's obligation is to return a fixed dollar amount or a fixed shekel amount, we should first note that the major is which conversion rate to use for the value in shekels. As an example, suppose the dollar rose by twenty-five percent between the time of the purchase in the store and the payback. If we view the loan as a dollar loan A will receive the same amount of dollars he gave to B. If it is a shekel loan, A will lose twenty-five percent since A will have to repay the credit company the amount of dollars that the credit company charged him but the shekels he will receive from B are worth twenty-five percent less.
According to the first approach, since A lent B dollars, B is obligated to return dollars. The basis is a ruling of both the Ketsos (101, 5) and Nesivos ((107, 4) and also in the Chavos Da'as, of the Nesevos, (161, 1)) that a borrower is obligated to return what he receives. For example, if a person borrows apples from his neighbor, he must return apples unless otherwise stipulated. Thus, according to the first approach, since B really borrowed dollars, his obligation is a dollar obligation. Even according to the second approach, since A and B are not speculators and all A wants from B is to be repaid what he gave him, it is obvious that B obligated himself to give the amount of dollars that the credit card charged A.
Thus, we have established that the loan is a dollar loan and the loan amount is the amount of dollars that the credit card company charged A.
If A and B later agree that B should return shekalim, the amount of shekalim B will need to give A is the amount of shekalim that it costs to obtain the amount of dollars that he owes A on the day that B repays his loan. The reason is because B really owes dollars and they are just making an agreement that repayment will be made in shekalim. (This is explicitly ruled in Toras Ribbis (19, 4) and is not controversial.) Therefore, the amount of shekalim that B must repay is the amount that is needed in order to buy the dollars that he owes on the day he repays.
Another question you ask is if B needs to pay just the amount of dollars which were really needed in order to get a thousand shekels or the amount that A was charged. The reason there is a difference is that credit card companies charge more dollars than one would need to obtain a thousand shekels from a money changer.
The poskim (e.g., Toras Ribbis 5, 1) prove general rule that when one borrows money, the borrower must pay the lender, besides the actual amount that he received, all of the expenses that the lender incurred. Therefore, B must pay the entire amount that A was charged because that was A's expense.
The source for this very basic ruling is a Mishna (BB 167B) that rules that when one borrows money the borrower must pay the cost of the scribe and materials, since he is the one that wanted the loan. We see that even though the borrower must pay more than the amount he receives, there is no problem of interest because he is obligated to pay all of the lender's expenses. Therefore, if the credit card company charges A more than it really costs to obtain a thousand shekels, that is an additional expense which B must pay.
Finally, you asked if there is an issue of ribbis. This illustrates the difference between the two approaches to the obligation of the cosigner.
According to the first approach, since A lent B dollars in Eretz Yisroel where dollars are not legal tender, there is an issue known as so'o beso'o, lending and borrowing any object that is not money.
However, according to the second approach, since B never borrowed money from A but just created a new obligation, there is no issue.
Even according to the first approach the issue of so'o beso'o will not pose a problem since the Gemara (BM 75A) rules that if the borrower already has some of the item in his possession besides what he borrowed, he is allowed to borrow a so'o beso'o. Therefore, if B owns dollars, he is allowed to borrow dollars even in Eretz Yisroel.
In conclusion: B must pay A all the dollars that A spent to pay for B's purchase. If they both later agree that B should pay in shekels, B must pay the amount of shekels needed to pay in full his dollar obligation on the day of repayment. Finally, while there may be a ribbis issue of so'o beso'o, but practically it probably will not pose a problem.
