September 17, 2008

Is a charity credit card a good idea? Nope.

Charity credit cards or 'Affinity' cards are credit cards that have benefits for a charity or organization. Are they a good deal for you and the charity?

I think giving to charity is great and I would definitely encourage people to do so. But before you sign up for a charity / affinity credit card you should figure out how much exactly the charity is getting and determine if there's other better alternatives.

I recently ran across a reference to the Working Assets credit card. They give 10¢ to charity for every transaction you make. Plus they have rewards option for the card user. On first glance this looks like a good deal for both the charities and the card holder. But if I look a little deeper it isn't that good. The 10¢ per transaction seems nice, but the average credit card transaction is over $100 so that's 0.1% for the charity on average. The rewards program is defined in the fine print and it isn't that great either, they offer $100 gift card for 12,000 points or an airline ticket for 25,000 points. The $100 gift card is only 0.8% return and the airline ticket deal is no better than any typical airmiles card. Overall the working assets card is netting less than 1% rewards between the charity and user rewards points. They also advertise a free companion airline ticket when you sign up for the working assets card. But in the fine print they say its only offered via a specific travel organization and I couldn't find any information on the cost of the tickets. I'm doubtful that companion ticket is a good deal considering.

Looking at a few other cards that give to charity:

Target RedCard gives up to 1% of purchases to local schools. Note the 'up to' bit there. They pay 1% of purchases made at Target but only 1/2% of purchases made elsewhere. Target also gives you a 10% off if you accumulate 1000 points there. This alone might be a decent deal if you shop at Target a fair amount but it really depends on your shopping habits. Looking at my spending habits I don't see a single store that would benefit me with this kind of reward.

Ducks Unlimited WorldPoints Visa
card uses the same Worldpoints rewards of the Working Assets card and they say they contribute a 'portion' of the purchases to Ducks Unlimited. I can't find any reference in the small print saying how much of a portion it is. The Consumer Reports article on the topic said its 0.25%.

Make-A-Wish Platinum card from Bank of America gives 0.65% from every purchase to the Make-A-Wish foundation.

World Wildlife Fund card gives 1% of your purchases to the WWF.

The charity cards out there don't seem to give more than 1% maximum to the charity. On the other hand its pretty easy to find cash rewards cards that will net you over 1% cash back. The American Express TrueEarnings card I have now gives 3% back on restaurants and gas, 2% on travel and 1% on other purchases. My Citibank dividend card gives 2% on gas, groceries, drugstores, utility bills and 1% on all other purchases. So overall these cards will net you 1-3% range easily with a minimum of 1%.

You're basically guaranteed to get more in cash back rewards with a good rewards card than you would be able to give to charity via a charity card.

So why not get a cash back reward, use it to accumulate cash rewards from your purchases and then donate that reward to charity? You'll : 1) net the charity more, 2) you'll have the freedom to chose the credit card you want, and 3) you'll be able to deduct the charity contribution from your taxes. Both you and your favorite charity will come out ahead if you use a good cash rewards card to get money for your charity instead of a dedicated charity credit card.


Also see the Consumer Reports article : Give While You Spend

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