Cash back credit card or a dedicated charity credit card?

Andrew Hagger weighs up the pros and cons of using your credit card to donate to charity.

Despite high levels of unemployment, rising prices and household budgets being squeezed, many people still manage to find money to donate to charity.

However a recent report from Halifax Bank said that even though seven in ten people still give money to charity, increasing numbers find they have little or nothing left to donate.

Aside from the high profile TV charity extravaganzas, a simple yet popular way of supporting worthy causes is by using a charity credit card which gives a small percentage to your charity every time you spend on it.

Giving via a charity credit card has its plus points, the main one being you are giving to a worthy cause of your choice simply by going about your daily life. So paying for the weekly shop by card or a trip to the garage to fill up with petrol will lead to a donation being made without you even having to think about it.

The Co-operative Bank, for example, says that its charity credit cards have generated more than £6million for good causes since 2009, a sum certainly not to be sniffed at.

It is currently running a promotion on its RSPB credit card for July and August where each new card will generate a payment of £36 to the charity, double the usual £18 donation, and in a similar promotion Save the Children will receive £30 rather than the normal £15 during the same window.

Among the tens of millions of pounds raised via MBNA charity cards, £1.5million has been raised for the National Trust as well as £800,000 from its 80,000 World Wildlife Fund cardholders in the last year alone.

A spokesman from MBNA, said: “We have tens of thousands of charity credit cards in the UK market, which have helped contribute millions to charities over the last 20 years”

It is good news that such large sums are being generated via charity credit cards, but you cannot help feeling that the rebate levels could be more generous.

The tables below show that donations in the first year you take out a charity card are boosted by initial fixed sum contributions the first time the card is used, but from year two onwards the returns are less impressive.

By switching to a cashback card and making the donation yourself, it is easy to earn double the amount raised on a charity credit card and, as the table below highlights, in some cases it can be up to four times as much.

 

For example the Platinum Cashback Credit Card from American Express pays 5% cashback during the first three months (max £100) and up to 1.25% of your spending from there on.

So if you want to earn a better return, think about using a credit card that gives you cashback, and then once a year when you get your rebate, use this money to make your own pledge.

This sounds good in practice, but the downside is that it only works if you remember to send off your donation each year.

This is where the charity credit cards hold the upper hand, because although the amount donated may be less at least the donations are made every time without fail and don’t rely on people remembering and then making that extra little effort to forward their charitable donation from their own funds.

The underlying message is don’t stop giving, but perhaps think about being a bit smarter with your choice of card and it will be your charity that will reap the rewards.

 

TABLE 1 Provider Initial contribution to charity On-going contribution to charity Charity donation based on £6000 spend year 1 Charity donation based on £6000 spend subsequent years
Oxfam  The Co-op Bank £15 when opened plus £2.50 on first use 0.25% of purchases and balance transfers £32.50 £15.00
RSPB  The Co-op Bank £18 when opened plus £2.50 on first use 0.25% of purchases and balance transfers £35.50 £15.00
Save the Children  The Co-op Bank £15 when opened plus £2.50 on first use 0.25% of purchases and balance transfers £32.50 £15.00
Shelter  The Co-op Bank £20 on first use of card 0.25% of purchases and balance transfers £35.00 £15.00
RSPCA  MBNA £20 on first use of card (within first 90 days) 0.25% of purchases £35.00 £15.00
WWF UK  MBNA £6 on first use of card (within first 90 days) 0.40% of purchases plus £2 per year £30.00 £26.00
Dogs Trust MBNA £4 on first use of card (within first 90 days) 0.25% of purchases plus £2 per year £19.00 £17.00
National Trust MBNA £15 on first use of card (within first 90 days) 0.30% of purchases plus £2 per year £33.00 £20.00

 

 

TABLE 2 Comparison based on £200 per month spend on petrol, £400 per month supermarket spend and £200 per month other spending. Total £800 per month = £9600 per year.

 

    Charity donation based on £9600 spend year 1 Charity donation based on £9600 spend subsequent year s
Amnesty International  The Co-op Bank £41.50 £24.00
Oxfam  The Co-op Bank £41.50 £24.00
RSPB  The Co-op Bank £44.50 £24.00
Save the Children  The Co-op Bank £41.50 £24.00
Shelter  The Co-op Bank £44.00 £24.00
RSPCA  MBNA £44.00 £24.00
WWF UK  MBNA £44.40 £40.40
Dogs Trust MBNA £28.00 £26.00
National Trust MBNA £43.80 £30.80
American Express – Platinum Cashback Credit Card American Express £165.00* £95.00*
Santander 123 Credit Card Santander £96.00* £96.00*

*after annual card fee deducted

ENDS

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