How Do Charity Credit Cards Work?
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Charity Credit Card FAQ's
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Charity credit cards are issued by the usual lending organisations, i.e. banks and building societies, which then channel some of the proceeds from credit card charges to the named charity.
How do charity credit cards help the charity?
Charity credit cards are an important source of revenue for charitable organisations.
The lending organisation pays for the advertising and maintenance costs of the card, and a percentage of the profits accruing from card charges are then paid to WWF, the Global Fund, or whoever the named charity is.
Often, an initial bonus is also paid to the charity immediately upon a customer taking out a charity credit card and sometimes each year the account remains open.
How much money does the charity receive?
The donation amount given to charity for the charity credit card use actually varies between cards.
While it may not exactly sound fair - after all a good cause is a good cause regardless - different credit card companies have seemingly negotiated different donation payouts.
The amount donated can sometimes even vary between charity credit cards issued by the same bank.
The donations are generally around 0.20% to 1%, with the American Express Red credit card offering the highest charity donations for your spending.
Where figures are available we've created a charity donation calculator to help when comparing charity credit cards. This 'calculator' will let you know the amount of donations your spending will generate on each card.
Where does the money come from?
Aside from interest charges and usage fees, all credit card companies make money each time a cardholder uses the card. This money is made from charging retailers and companies a fee when a customer pays by credit card.
You may have noticed some companies who charge a percentage fee if you choose to pay by credit card, for example travel operators.
While most retailers and companies cover this cost themselves, the reason some companies do charge a 'credit card payment' fee is because they are charged a fee when a customer pays for their goods or services by credit card.
It is this fee, which brings in profits for credit card companies - even when you repay your balance in full and avoid any interest charges or fees.
Does the percentage of my card's charges go straight to the charity?
No. The bank or building society collects the charge, and then periodically moves a portion of that money on to the charity.
But this is actually a good thing, in many ways: if a cut went straight to the charity every time someone used their affiliated card, they would need to employ extra staff to process thousands of tiny transactions per week.
Of course this situation also benefits the lending organisation, as they can then claim that they 'contributed £x million to charity this year' in their annual report...
Will it cost me anything?
Generally speaking, no more than usual.
Using a credit card can often cost something somewhere down the line. However, you can play smart and avoid a lot of the costs.
The usual rules apply here. You should always pay up your balance ahead of time if possible, to avoid penalties and interest.
Charity credit cards all offer interest free periods on purchases, typically 56 days. Pay your outstanding balance within this timeframe and you will avoid nasty surprises.
But bear in mind that these interest free periods usually only cover purchases: cash advances and other transactions are likely to incur interest from the date of the transaction, so it's better to use a debit card for cash advances.
Do I have to get in touch with the charity to make sure the donations get there?
No - this is all set up on the lending organisation's side. The bank etc. will automatically begin sending the agreed percentage of charges to the named charity in question.
What other differences are there between regular credit cards and charity credit cards?
Apart from generating much needed revenue for charities, there's no difference at all.
Charity cards retain all of the usability characteristics of any other type of credit card for the cardholder.
Charity credit cards are often termed as 'affinity' or 'reward' credit cards. What does this mean?
Affinity in this context means that the credit card has a specific link or an affinity with an organization - i.e. a specific charity.
Reward cards you probably know about - holding a reward credit card implies some reward incentive. The difference between other rewards credit cards and charity rewards credit cards is that in this case the reward goes to a charity rather than to you.
So, are charity credit cards any good?
To your pocket, no more than usual. To your conscience, yes!
They are just as 'good' as any other credit card in terms of where and how you can use them, and you get the added benefit of knowing that a cut of the charges made to retailers and to yourself go to a good cause.
Like any other kind of credit card, you should shop around for the best deal. Many MBNA charity credit cards offer 0% balance transfer deals for 12 months.
The Co-operative Bank think credit card and the Barclaycard Breathe credit card both offer rate reductions and discounts on certain ethical or environmentally friendly products.
Holding a credit card that supports your favoured charity only makes sense, though, that's if the particular deal offered is any good.
When comparing charity credit cards make sure to get a good deal for you as well as for the named charity. For example, you may want to look for a 0% purchase deal or a low interest rate for longer-term cheapness.
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