How generous are charity credit cards?
Charity credit cards should be a straightforwardly good thing: a way of giving to causes that are in desperate need of cash by simply switching out a piece of plastic.
But the truth is that these cards are actually distinctly, even somewhat insultingly, uncharitable.
In this guide we take a look at just how little they give to good causes, particularly in comparison to their nearest equivalent, cash back cards.
The rates charity credit cards give back to causes vary but typically they'll give a lump sum when the cardholder makes their first purchase or every year the account is active and, in addition, pay a few pennies for every hundred pounds made in purchases.
Just to illustrate the amounts we're talking about here, that could break down like this:
|£20 on opening
30p for £100
|£38 year 1
£18 year after
|£42.50 year 1
£22.50 year after
|£74 year 1
£54 year after
|£10 on opening
20p for £100
|£22 year 1
£12 year after
|£46 year 1
£36 year after
|£74 year 1
£54 year after
|£2 a year
15p for £100
Particularly for big spenders and in the first year, then, charity credit cards actually seem pretty charitable.
Cash back vs charity
However, let's compare the amount cardholders give here with what they could be giving with a cash back credit card.
Let's say that Mr Smith decides to push ahead with building that conservatory he's dreamed of but the required destruction of 10 square metres of natural hedgehog habitat weighs heavy on his mind.
For the benefit of hedgehogs everywhere he decides to make the £2,000 purchase on a charity credit card that donates 30p to The National Trust every time it's used for £100 of purchases (as the real National Trust card does at the time of writing).
The hedgehogs would get £6, barely enough for a spine scarf, or whatever it is that hedgehogs need.
If Mr Smith made that same purchase with a market leading cash back credit card, though, he could expect to earn cash back at a rate of about 2% or £40 which could go on hedgehog supplies.
If he timed that conservatory purchase during a cash back credit card's bonus period the cardholder could even earn up to 5%, or £100 for hedgehogs.
Again, these are general earning rates only: for a more accurate view of the current cash back deals available see our cash back guide here.
Another plus: Gift Aid
On top of this, giving cash back directly to charity means that causes can benefit from Gift Aid.
Gift Aid is a Government scheme which allows charities to reclaim just over the basic rate of tax, 20%, on donations from UK taxpayers.
By just checking the Gift Aid box when making a donation and filling out an address box, anyone paying income tax can give:
- £1.25 for every £1 donation.
- £625 for every £500 donation.
- £937.50 for every £750 donation.
- £1,875 for every £1,500 donation.
In addition to this, higher rate, that's 40% and 45%, taxpayers can reclaim their own tax on the donations by declaring the money they've given through self assessment tax forms.
So they'll get the difference between the basic and higher rate - 20% or 25% - back and can choose either to keep it or to give an even bigger donation by donating that extra cash.
Some charity cards 'top up' their cash back rate with Gift Aid but most just ignore it and the charities just miss out.
Ease vs generosity
At the end of the day, the cash back route does take more effort when specialist charity credit cards will do all the donating legwork for you.
However, we think the figures speak for themselves: cash back credit cards are also a great way to give money and using them only requires a little more effort.
Aside from anything else, cash back has had a bit of a renaissance in the past year or so while charity credit cards only seem to have declined in popularity.
It's, therefore, much harder than it once was to give to your favourite cause through a branded credit card and much easier to take advantage of a cash back deal to give more.
Giving with credit cards
However, despite the obvious benefits of giving with credit cards, cash back or charity, there are some risks involved too.
Like all forms of credit card rewards, as we cover here, both deals are only beneficial when holders can pay off in full at the end of every month.
Without making full repayments, the amount cardholders lose in interest will far outweigh the amount they're able to give.