About twenty years ago, banks and other financial institutions figured out that the way to get people to open their wallets is to appeal to their hearts. Affinity credit cards have both the issuer's logo and the logo of the charity they support. When the card is used to make a payment, transfer a balance, or get cash from an ATM, the bank gives a portion of the transaction amount to the charity.
If you use a charity credit card, will you still need donations?
The idea behind the affinity credit card, which is also called a charity credit card, is great: every time you make a purchase you had to make anyway, you can use your credit card and donate to charity. You can finally feel good about using your plastic card to buy things. But does it pay off?
Most charity credit cards have small donations compared to how much interest cardholders have to pay, and most of the time, the annual fees are pretty high. If using the charity card to give $6 a year to the homeless leaves you in need of donations yourself, it might not be such a good idea to use the charity credit card, no matter how good it makes you feel inside.
About.05 percent of what people spend on affinity cards goes to charity. So, a half-cent is given for every dollar. What does it all add up to? With an affinity card, a $100 purchase means that 50 cents will be given to the charity associated with the card. If you spend $100 on your credit card every month, you could give about $6 a year. If you pay 21 percent interest on your payments each month and a big annual fee to the credit card company, it's hard to get excited about the money you're giving to charity.
Also, charity credit cards usually don't have the same benefits as regular credit cards. You'd be hard-pressed to find a charity card with cash back, travel accident insurance, or extended warranty coverage, all of which are becoming more common on traditional credit cards.
People who spend a lot and don't save
If you are one of the few people who regularly spends a lot of money on credit cards and pays off the balance in full every month to avoid most of the interest and fees, an affinity card may be a good way for you to give money to charity on a regular basis.
Also, if you're thinking about using an affinity card to donate, keep in mind that donations made with a credit card are not tax-deductible because the money comes from a contract between the card issuer and the charity, not from your own pocket.
Credit Cards with Interests
Even though people who use charity credit cards pay higher interest rates and annual fees and get fewer perks than people who use traditional credit cards, these credit cards are very popular. Take Charge of Education is a group that gives scholarships to students and teachers. Target's credit card has given more than $19 million to this group. This particular charity credit card lets the cardholder choose which school their 1% donation goes to. This makes the card very popular with families with kids in kindergarten through grade twelve.
Competition is very strong.
There is a lot of competition in the credit card business, with banks and card issuers literally trying to outdo each other to keep and get new cardholders. Credit issuers love affinity cards because the people who use them are usually very loyal. They keep their credit cards and use them often because they believe in the cause they are donating to.
