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Credit card Guides
Charity credit cards
Updated: Tuesday 29 November, 2011
By Martin Fagan
Every time you use a charity credit card, you make a donation to charity. But are they really worth it? How much of what you spend gets donated to the charity? And are there alternative ways to donate?
The trend for reward schemes and loyalty cards has taken on a new, socially conscious face, with a wave of credit cards available that donate cash to charity when you use the card.
You can compare charity credit cards with Creditchoices.co.uk.
What are they?
Charity credit cards give money to your chosen charity when you sign-up; after that, a percentage of each transaction you make also goes to the charity. They are marketed as a way of giving without curbing your consumer urges - in fact, the more you spend, the more you give.
But for you to be able to donate without any cost to you, you need to ensure that you pay the balance off in full each month, or the amount you pay in interest will invariably be far more than is donated to the charity on your behalf.
If you are unable to pay off your credit card balance in full each month then a lifetime balance transfer or a 0% balance transfer credit card may be a better option.
What are the benefits?
- Giving for free - According to Moneyfacts.co.uk, the average interest rate on credit cards is currently slightly more than 18%. You may be able to get a better deal than this with a charity credit card, but it’s not likely to be massively lower. The main benefit of the cards is that they give money to charity on your behalf.
- Spend more, give more - The amount that’s given depends on how much you use the card, but this means your daily spending will all bolster the coffers of your favourite cause. It also means that you don’t have to remember to give to a charity - it is automatically done for you.
- Guaranteed giving - Although the savings that you could make by taking a lower annual percentage rate (APR) card, or by going for a points or cashback credit card instead, might be greater, most people would be unlikely to pass this on. Using a charity card ensures that your goodwill is fruitful.
- Discounts - Some cards also offer discounts at partner stores, but as with the others, these benefits are automatically eliminated as soon as you start paying interest on the card.
What are the disadvantages?
- Higher APR - You can get much lower life-of-balance APRs with other credit cards, so if you’re one of the millions of credit cardholders who regularly only make minimum payments to their credit cards, you’d be better off going for the lowest APR.
- Transfer fees - Although some cards offer 0% balance transfers, these are almost entirely subject to a fee. This varies from a flat fee of around £50 regardless of the amount you’re transferring, to a percentage of the transfer value, typically around 3%. Transferring £7,000 at this rate would have already cost you £210.
- Low donation - The percentage donated isn’t very high. It ranges from 0.25%, up to 1%, depending on the card issuer. If you wish to donate a higher percentage to charity through credit card use, then consider taking out a cashback card and giving the cash rewards that accrue back to a designated charity. This way, the financial gains for the charity could be much higher.
- No gift aid - One of the biggest drawbacks for the charities themselves is the fact that the tax on any money donated via your credit card cannot be claimed back through the government’s Gift Aid scheme. Normally, when you donate your own money - that you’ve paid tax on - you can tick a box indicating that the charity can claim that tax back. This essentially means that for every £1 you give, the charity currently gets £1.28. They only get the £1 if it comes from a charity credit card. The Virgin Charity Credit Card does provide gift aid to be added to donation, a cash is given to charities via Virgin Money Giving.
And finally...
Despite the benefits, the best way to give to charity is by setting up a direct debit from your account to donate money directly. This guarantees that your payments are made and leaves your conscience free to take the lowest possible APR. And the charity gets the extra Gift Aid donation.
If however, you’re certain that you will clear your balance each month and not incur any hidden charges for cash advances or online gambling, then charity credit cards are a way to give even more.
Find a charity credit card for your preferred cause with Creditchoices.co.uk.