Finance & Investment

Charity Credit Cards - A Brief Introduction

A charity credit allows a cardholder to make a donation to charity – a percentage of each card transaction – every time the card is used. In addition, the chosen charity may also receive a lump sum donation when the card account is opened, and subsequent yearly donations. The percentage actually donated to charity may vary from card to card, as may the interest rate charged, and any introductory special offers.
How to Choose a Card
Before you actually commit to one charity card, over another, a little market research may be necessary. It may be possible to take advantage of a low, introductory interest rate – possibly as low as 0% – for an incentive period, typically of 6, or 12, months. This can be useful, particularly if you intend to pay off the balance, in full, or transfer it, before the end of the incentive period. It may also be possible to transfer the balance of your existing credit card, at 0% interest, although there may be a charge for the initial transfer. For example, at the time of writing, a major charity credit card was charging 2.0% of the total amount transferred, but “capping” that charge at a maximum of £50.
What are the Benefits?
The most obvious benefit of a charity credit card is that you, the cardholder, do not have to remember to make a donation to your favourite charity; it is done for you, as a matter of course, every time you use the card.
When you apply for a charity credit card, and your account is opened, the charity usually receives a donation of somewhere between £2.50 and £18.00. For each subsequent transaction, between 0.25% and 0.5% of the total purchase value is donated. This equates to between £0.25 and £0.50 for each £100 spent on the card. Donations are made at no further cost to the cardholder, provided he, or she, pays off the full balance of a credit card account each month. Failure to do so results in interest charges being applied to the account, and these are likely to be far higher than the amount originally donated to charity.
Credit Scoring
When you apply for a new credit card or any other form of credit, the credit provider contacts a credit reference agency, or agencies, to establish your credit history, and credit “score”. This is an indication of the level of debt that you already have, and how you have managed that debt, to date. Do bear in mind that frequent applications for credit may be taken as an indication of desperation on your part, and have a negative effect on your credit score.
Conclusion
Carefully chosen, and managed, a charity credit card can be a useful financial tool, in its own right, but with the added advantage of regular donations to your favourite charity, at no extra cost to yourself. It is, however, important to choose a credit card before you begin the application process. The other alternative, of making multiple applications, and choosing a card from those which are accepted, can have a much more profound, and negative, effect, on your overall credit rating.