Today's modern consumer has a socially conscious face; eggs are free range, GM is out, gas and electricity has gone green and now you can even give to charity every time you use your credit card.
Banks are continually coming up with new ways of attracting customers; tempting them with airmiles, cashback and reward schemes for their loyal customers. The latest trend is charity credit cards and in the form of .
What are they?
Offered in conjunction with everyone from Cancer Research to the RSPCA to Children in Need, these cards work by giving a percentage of all your spending to the charity of your choice. But what does that mean for your finances? Are you really giving without having to give, or will a charity credit card leave you out of pocket?
What are the benefits?
Obviously, they allow you to give money to charity while simply continuing your daily life; doing your shopping, going out to dinner or buying some new shoes. Each time you spend, your chosen charity will receive a donation.
This means that your kind-hearted giving is guaranteed. Many people want to give to charity but don't want to sign up to a monthly direct debit, or simply forget to do so. Using a charity card means you can rest assured that you're doing your bit, without even having to think about it. It also means that the more you spend, the more you'll be donating.
However, to make sure that you don't end up out of pocket, you have to make sure that you absolutely always pay the balance off in full each month so that you don't start paying interest. Otherwise, the interest you pay will massively outweigh the amount that your charity receives.
And the disadvantages?
Firstly, the amount that is donated is very low. It ranges from 0.25 per cent up to 1.25 per cent with the Amex Red - giving to the Global Fund to fight HIV/AIDS. This means that you need to spend a lot to make a worthwhile donation.
Giving through a charity credit card also means that the charity cannot take advantage of the Government's Gift Aid scheme which allows charities to reclaim the tax already paid on any donations. This means that if you give them money yourself they will get ?1.28 for every ?1 you give. Through the credit card, they will only get the ?1.
And unfortunately, these cards don't come with the most competitive interest rates - you can get much lower APRs with other cards. And although some people are happy to have a higher APR if it means regularly giving to charity, there is another way.
Cashback cards tend to give much better returns than a reward scheme card or charity credit card. So you could in fact wait for your cashback cheque to arrive and give far more to your chosen charity than if you'd used a charity card - with extra to spare for yourself. But you have to ask yourself how likely you are to actually do this. Alternatively you could wait until you get your cashback and then sign up to give a set amount and recycle a cow with Oxfam or save a panda with the WWF.
But remember...
Whenever you sign up to a credit card for their reward scheme, you need to be disciplined with yourself and ensure that you pay the balance off in full each month, avoiding the interest. Otherwise whatever points, cashback, or donations you build up will be out-shadowed by your interest payments. And make sure that you don't get caught out with instant cash transactions where the interest will begin to build up immediately.
Even if you're resolute about giving to charity through your credit card - which is still a good way of donating - you do need to make sure that you shop around and compare the different cards available. Some have lower APRs and others give a higher percentage to charity. If you're really lucky, you'll find one that does both.
