Are Prayer Beads Allowed in Islam?
Question

What is the ruling on using prayer beads?
Praise be to Allah.Some scholars say that it is permissible to use the Masbahah (prayer beads), but they say that it is preferable to do Tasbih (count praises) on one’s fingers; others say that it is Bid`ah (reprehensible religious innovation).
Shaykh Al-Islam Ibn Taymiyah (may Allah have mercy on him) said in Al-Fatawa (22/187): 
“Some of them might show off by putting their prayer-mats over their shoulders and carrying their Masbahah in their hands, making them symbols of religion and prayer. It is known from the Mutawatir reports (reports in such large numbers that they couldn’t be forged) that neither the Prophet (peace and blessings of Allah be upon him) nor his Companions used these as symbols. They used to recite Tasbih and count on their fingers, as the Hadith says: “Count on your fingers, for they will be asked, and will be made to speak.” Some of them may count their Tasbih with pebbles or date stones. Some people say that doing Tasbih with the Masbahah is disliked, and some allow it, but no one says that Tasbih with the Masbahah is better than Tasbih with the fingers.” Then he (may Allah have mercy on him) goes on to discuss the issue of showing off with the Masbahah, saying that it is showing off with regard to something that is not prescribed by Islam, which is worse than showing off with regard to something that is prescribed.”
Al-Shaykh Muhammad ibn Salih Al-`Uthaymin (may Allah have mercy on him) was asked  (al-Al-Liqa al-Al-MaftoohMaftuh, 3/30) whether using the Masbahah for Tasbih is Bid`ah, and his reply was: 
“It is better not to do Tasbih with the Masbahah, but it is not Bid`ah , because there is a basis for it, which is the fact that some of the Sahabah (Companions) did Tasbih with pebbles. But the Messenger (peace and blessings of Allah be upon him) taught us that Tasbih with the fingers is better, as he said, `Count with the fingertips, for they will be made to speak.’ Doing Tasbih with the Masbahah is not haram (impermissible) or Bid`ah, but it is better not to do it, because the one who does Tasbih with the Masbahah has shunned something better. Using the Masbahah may also be contaminated with some element of showing off, because we see some people carrying Masbahah that contain a thousand beads, as if they are telling people, `Look at me, I do a thousand Tasbihs!’ Secondly, those who use the Masbahah for Tasbih are usually absent-minded and not focused, so you see them doing Tasbih with the beads, but their gaze is wandering all over the place, which indicates that they are not really concentrating. It is better to do Tasbih with one’s fingers, preferably using the right hand rather than the left, because the Prophet (peace and blessings of Allah be upon him) used to count his Tasbih on his right hand. If a person counts his Tasbih using both hands, there is nothing wrong with that, but it is better to use the right hand only.”
Ash-Shaykh Muhammad Nasir Al-Din Al-Albani (may Allah have mercy on him) said in As-Silsilah Ad-Da`ifah (1/110), where he quotes the (inauthentic) Hadith “What a good reminder is the Subhah [Masbahah],”
“In my view, the meaning of this Hadith is invalid for a number of reasons:

Firstly, the Subhah [Masbahah] is Bid`ah and was not known at the time of the Prophet (peace and blessings of Allah be upon him). It happened after that, so how could he (peace and blessings of Allah be upon him) have encouraged his Sahabah to do something that was unknown to them? The evidence for what I have said is the report narrated by Ibn Waddah in Al-Bid’ wa’l-Nahy `anha from Al-Salt ibn Bahram, who said: `Ibn Mas’ood passed by a woman who had a [Masbahah] with which she was making Tasbih, and he broke it and threw it aside, then he passed by a man who was making Tasbih with pebbles, and he kicked him then said, “You think you are better than the Sahabah, but you are following unjustified Bid`ah! You think you have more knowledge than the Companions of Muhammad (peace and blessings of Allah be upon him)!”’ Its chain of narrators is authentic to As-Salt, who is one of the trustworthy followers of the Tabi`in.
Secondly, it goes against the guidance of the Prophet (peace and blessings of Allah be upon him). `Abdulah ibn `Amr (may Allah be pleased with him) said, `I saw the Messenger of Allah (peace and blessings of Allah be upon him) counting the Tasbih on his right hand.’”

He also said (1/117): 
“If there is only one bad thing about the Masbahah, which is that it takes the place of the Sunnah of counting on the fingers, even though all agree that counting on the fingers is preferable, then that is bad enough. How rarely I see people counting their Tasbih on their fingers!
Moreover, people have invented so many sophisticated ways of following this Bid`ah, so you see the followers of one of the [Sufi] Tariqahs (orders) wearing the Masbahah around their necks ! Or some of them counting with the beads whilst talking or listening to you! Or another one – the like of whom I have not seen for some time – riding his bicycle through a street crowded with people, with the Masbahah in one of his hands! They are showing the people that they are not distracted from the remembrance of Allah for even an instant, but in many cases this Bid`ah is a cause of their neglecting what is obligatory. It has happened many times – to others as well as myself – that when I greet one of these people with Salam, they answer only by waving and not by saying the words of the greeting. The bad results of this Bid`ah are innumerable, and no one can say it better than the poet:
`All goodness is in following that which went before (the Salaf)
All badness is in the innovations of those who came later.’”
And Allah knows best.