Charity credit cards have mostly all been removed from the market for new customers, but some existing customers may still have them.
Typically donating around 20-40 pence per £100 spent, charity credit cards were previously criticised for offering a lower pay-out than could be earned with a cashback credit card.
In addition, it wasn't until 2010 that any charity credit card included Gift Aid on their donations, despite the fact Gift Aid had been extended to any amount in 2000.
Charity credit card donations
Charity credit cards used to be commonplace with cards available connected to organisations including the National Trust, the RSPCA, Oxfam, WWF, the Dogs Trust and many more.
They were largely provided by MBNA and The Co-operative Bank who ran many affinity credit cards with football clubs and political parties, as well as charities. These charity credit cards generally all worked the same, although actual amounts donated to charity did vary.
It was typical to see donations between 20p and 40p for every £100 spent by the cardholder, as well as sometimes an account opening donation of around £10, and often a yearly bonus between £2 and £10.
Charity credit cards have proved profitable for charities though. With the Co-operative Bank raising £6 million between 2009 and 2014 for charity through its affinity credit cards.
The MBNA WWF credit card was particularly generous, but even that didn't beat most cashback credit cards. Despite this, WWF say the credit card helped to raise over £13 million in the first 20 years of partnership with MBNA.
The WWF credit card is no longer available to new customers, but existing customers still hold accounts and MBNA continue to make donations to this day.
Here's what WWF credit cardholders would be earning:
- 40p for every £100 spent
- £15 per year the account remains open and active
Let's illustrate what that means against different spending levels:
|Donations to WWF||£39||£51||£87|
For large spenders particularly, charity credit cards can generate some reasonable sized donations.
However, in most cases, cash back credit cards are likely to earn more.
Charity vs cash back credit cards
Cash back credit cards reward cardholders with a percentage of their spending back as cash, usually credited straight to the account.
Cash back rates aren't as generous as they once were, but there are multiple offers around the 0.5% figure. That's the equivalent of 50p for every £100 spent - so 10p more than the WWF card.
In addition, it's still possible to get a bonus of 5% cashback for the first 3 months with some cashback credit cards.
That means, someone making a purchase of £2,000 on a charity credit card that donates 40p to charity each time it's used would generate £8 for the charity.
However, if that same purchase was made with a 0.5% cashback credit card, it would earn £10. If it was made during the first 3 months of holding the card, it could make £100.
While the charity figures don't seem so bad here, remember the WWF example we're using is probably one of the most generous charity credit cards that was available. If the card gave just 25p per £100 spent, the donation would be just £5.
Also, cashback credit cards used to be more generous too, so it was common to see standard rates between 1% and 2% which created a starker difference to the charity card rates.
Charity credit cards typically don't add gift aid to the cardholders' donation.
While Virgin Money did launch a charity credit card in 2010 that did include gift aid, it's generally an exception to the rule because the donations are being made by the credit card companies, and limited companies are excluded from being able to claim gift aid on their donations.
Gift Aid means reclaiming the tax paid on income when you donate it to charity. It's worth 25p for every £1 donated.
This means people who earn cashback (at a higher rate), not only earn more money but they can claim gift aid when they donate it to charity, increasing its value even more.
Going back to our examples above, if a cardholder made £10 cashback on a £2,000 purchase and donated it to charity claiming gift aid. They'd actually be giving £12.50 to charity. And if they'd made the purchase during a bonus period, that could be as much as £125 with gift aid.
It's easy to see then why charity credit cards starting getting a bad reputation, and probably why they've slowly disappeared from the market.
That said, there is one major plus to charity credit cards: ease.
Ease of use
As we've seen above, the WWF credit card earned £13 million in donations from cardholders using their branded cards over a 20-year period. So they do contribute towards their income.
Probably the biggest selling point of charity credit cards is the "fit and forget" approach that someone doing what they do day-to-day, be that filling up their car with petrol, or buying the groceries, can automatically be donating at the same time, and as long as they use that card they won't forget.
Cash back credit cards on the other hand, while they may generate more, require a cardholder to take the time to account for their earnings, withdraw them and make a donation, all on a regular basis. And let's be honest, most people, however well meaning, just won't be regimented enough to do that.
Summary: Best ways to donate
It's somewhat unsurprising charity credit cards have all but declined due the criticism they received from having such lower earnings compared to other reward cards.
However, it's also a shame to see a valid method of actual corporate donation removed from the market too.
For dedicated existing customers who always pay off their credit card balance in full each month, it's a decent automatic way to contribute to a good cause without it costing anything extra.
Where cardholders of charity or cashback cards fail to make the full repayments though, charges in interest will far outweigh any amount they've made back on purchases.
In the current climate then, with lenders tightening their criteria and costs of living increasing while credit card rewards reduce, credit cards, even cashback ones, may not be the best way to fund good causes.