Human beings are weak by nature, and so it’s inevitable that when we interact we’ll have disputes and ill feelings. We can’t expect anyone, even ourselves, to be perfect. Sometimes it’s the other person’s fault, and “he started it,” and sometimes it’s ours.
Naturally, when someone wrongs us, we may feel very angry and vengeful. We ask ourselves: “How could he do this to me?”
We might decide never to talk to the person again, or to give him back what we got. These are all natural reactions, and Allah knows that we feel them. That’s why He gave the provision for al-Qisas– legal retribution.
At the same time, He also knows that, though we might not always realize it, somewhere within us there is a control switch with which we can turn off the anger and the desire for revenge. And He made provision for that too. So let’s look at these two ways of reacting to unjust behavior directed towards us, and choose the one that can give us better satisfaction.
Option 1: Seeking Justice
If someone is harsh to you, you have every right to reciprocate. Allah says:
And whoever avenges himself after having been wronged – those have not upon them any cause [for blame]. (Quran 42:41)
Then whoever transgresses the prohibition against you, you transgress likewise against him. (2:194)
During the caliphate of Umar, Abu Musa, at the time a governor, had a dispute with another man about some spoils of war. The man regarded the share given to him to be less than his due. Abu Musa saw this as insubordination to the governor, and so he punished the man with twenty lashes and shaving of his head. The man went to Umar and complained. Umar then wrote this letter to Abu Musa:
“ . . . so and so person has informed me of such and such. If you did it in public, I command you to stoop for him in public so that he may take revenge. If you did it in privacy, then his revenge should be similar to this.” 
Note that Umar took care that the revenge didn’t exceed the original act. Otherwise, the revenge itself becomes an injustice. Allah says:
And if you punish, then punish them with the like of that with which you were afflicted. (16:126)
Option 2: Showing Mercy
It’s the safer option:
The risk of exceeding limits is always there when you go for option 1, because when we’re angry we’re not in our right minds. In fact, in such situations, Satan gets the chance to play on our emotions. That’s why Allah asks us to seek refuge against Satan:
Repel evil with that which is better. We are Best-Acquainted with the things they utter. And say: ‘My Lord! I seek refuge with You from the whisperings of the Shayatin. And I seek refuge with You, My Lord! lest they should come near me.’ (23:96-98)
So it’s safer to forgive and let go than to seek retribution.
The Benefits of Forgiveness:
- Forgiveness is the best punishment.
“There is no better punishment for one who has disobeyed Allah with regard to you, than your obeying Allah with regard to him.” (Ibn Kathir)
- It’s a sure way of making great friends.
If you forgive someone who was unjust to you, there is a great chance that he will be surprised, realize his fault, and never repeat it. In fact, he will become a devoted friend to you. Allah says:
And not equal are the good deed and the bad. Repel [evil] by that [deed] which is better; and thereupon the one whom between you and him is enmity [will become] as though he was a devoted friend. (41:34)
- The consequences of forgiving are much more satisfying in the long run.
Allah forgives one who forgives other people, gives him great reward, and raises his honor.
And the retribution for an evil act is an evil one like it, but whoever pardons and makes reconciliation – his reward is [due] from Allah. Indeed, He does not like wrongdoers. (42:40)
The Prophet said:
…the servant who forgives, Allah adds to his respect; and the one who shows humility, Allah elevates him in the estimation (of the people). (Muslim)
The Example of Abu Bakr
Imagine that you have a poor relative for whom you provide maintenance. One day, you hear that this relative is spreading rumors about the character of your beloved daughter. How would you feel? How would you want to punish him?
Abu Bakr was in this situation. And guess what he did to him as revenge?
“By Allah, I will never provide Mistah with anything because of what he said about Aisha.”
This is a shining example of the virtue of Abu Bakr.
And Allah gave him an even better alternative:
And let not those who are good and wealthy among you swear not to help their kinsmen, those in need and those who left their homes in Allah’s Cause. Let them forgive and overlook. Do you not wish that Allah should forgive you? Verily! Allah is Oft-forgiving, Most Merciful. (24.22)
After that Abu Bakr said:
‘Yes! By Allah! I like that Allah should forgive me,’ and resumed helping Mistah whom he used to help before. (Bukhari)
Now let’s go back to the story of Abu Musa. Abu Musa followed the Caliph’s command and stooped in front of the man to receive his revenge. And guess what the man did? He said:
“O Allah, I have forgiven him.” 
Reference: Sa’d Yusuf Abu ‘Aziz, Men & Women around the Messenger.  ibid
Republished with kind permission from http://understandquran.com