How much does it pay to be charitable?
New findings from Confused.com reveal that charity credit cards may not be as ‘giving' as customers think. The comparison website has found that those wishing to be charitable may be able to provide greater support by ditching their charity card and replacing it with a cash-back reward card instead, potentially earning up to three times as much ‘cash' which can then be donated to a charity of the cardholder's choice.
Charitable giving in 2009 was 11% lower than 2008 according to the Charities Aid Foundation, no doubt a result of the tougher economic climate. With 45 charity credit cards currently available, accounting for 18% of the cards on the market, many providers are offering the philanthropists amongst us the chance to do our bit without dipping into our own pockets. However the ‘rewards' earned for charities via these bespoke cards are significantly lower than standard reward or cash-back cards. For example, someone spending £1,000 a month on the Greenpeace Platinum card from Co-operative Bank would earn a donation of £47.50 over a year. In comparison spending £12,000 over a year on an American Express Platinum Cashback card would result in £204 cashback, which could then be donated to the charity of the customer's choice, meaning an extra £156.50 of funding for the good cause.
Chris Griffiths, head of Credit Cards, at Confused.com, said: "Charity credit cards offer the chance to give to a good cause simply by using a designated card ahead of our other plastic when we're shopping. While they undoubtedly have honourable intentions, customers may in fact be able to make a bigger contribution by using a traditional cashback card and donating their rewards to the chosen charity themselves.
"Given that so many providers have corporate social responsibility programmes and extol their own ‘green' virtues it would be nice to see them apply the same standards to their charity cards as they do to their best reward cards. Until then it may be better for canny customers to opt for a cashback card and make their own donation.
"To get the most out of any rewards card it's imperative that the balance is cleared in full each month, otherwise the benefits will be eroded by interest payments. By using it as often as possible, ideally placing all transactions on the card, the reward can be made as big as possible, but this should only be done where customers can afford to pay it back straight away. For those who keep a balance on their card each month a 0% deal could be a more suitable option, as this would restrict interest payments allowing savings which could then be donated to charity if the cardholder so wished."