For about twenty years, banks and financial institutions have figured out that appealing to people’s hearts is the way to get them to open their wallets. Affinity credit cards have a charity logo as well as the issuer’s logo; each time the card is used to make a payment, balance transfer or withdraw cash from an ATM, the bank donates a percentage of the amount of the transaction to the charity.
Will You Need Donations After Using a Charity Credit Card?
The concept of the affinity credit card (otherwise known as charity credit cards) is great: every time you make a purchase you had to make anyway, you can use you credit card and donate to charity. Finally, you can feel good about using your plastic to make your purchases! But is it worth it?
Most of the charity credit cards offer miniscule donations in comparison to the amount of interest the cardholders are required to pay, and most of the time- they charge fairly high annual fees. If using the charity card to donate $6 a year to the homeless leaves you needing donations yourself, it may not be such a good idea to use the charity credit card no matter how warm and fuzzy it makes you feel inside!
The average donation given from affinity cards to charity is about .05 percent. So for every dollar, a half a penny is donated. What does that come out to be? A $100 purchase made with an affinity card translates into 50 cents donation to the charity affiliated with the credit card. If you spend $100 a month on your credit card, you’re looking at about $6 a year in donations. If you’re paying 21 percent interest each month on your payments, and a hefty annual fee to the card issuer, it’s hard to get excited about your contribution to charity!
Additionally, charity credit cards don’t usually provide the same perks that traditional credit cards offer. You’d be hard pressed to find a charity card that offers cash back, travel accident insurance, or extended warranty coverage- all extra items that are becoming more common on traditional credit cards.
High Spenders and No Balances
If you are one of the few, however, that spend a lot of money on a regular basis using credit cards, and pay off the balance in full on a monthly basis to avoid most of the interest and fees, an affinity card may be a reasonable option for you to make regular donations to charity.
Another thing to keep in mind when considering affinity cards for donation purposes, is that donations and contributions made through the use of a credit card are not tax-deductible since the donation is actually a contract agreement between the card issuer and the charity- and not from your pocket.
Popular Affinity Credit Cards
Despite the fact that individuals pay higher interest rates and annual fees when they use charity credit cards, and that cardholders of charity cards receive fewer perks than traditional credit cards- these credit cards are very popular. Target’s credit card has donated over 19 million to Take Charge of Education, an organization that provides scholarships to students and teachers. This particular charity credit card allows the cardholder to designate the school in which their 1 percent donations are sent to- making the card extremely popular with families with children in grades k-12.
Competition is Fierce
The credit card industry is a highly competitive one, with banks and card issuers literally trying to out-best one another in hopes of retaining and attracting new cardholders. Credit issuers love affinity cards because the cardholders are often very loyal- keeping their credit cards and using them often because they believe in the cause they are donating to.