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From Charity to ‘Ethics’- Can Your Credit Card Save the World?

In mid-January this year, with their accounting books barely closed on 2006, HBOS ecstatically announced that three major UK charities had received over £1.5m from their range of charity credit cards. This brings the total donated from HBOS charity cards to £19.5m over the last 17 years. "Charity cards are an excellent way of helping worthy causes” claimed the head of their credit card section Ken Stannard, “and customers benefit from great deals in the process.”

The swiftness of this announcement shows that the message is out there in the card marketing departments- charity cards are seen as an effective way to target the growing ‘ethical consumer’ market. Personal benefits such as cashback and rewards are waived by the card user, a named charity being paid by the issuer instead.

AMEX Starts Taking Liberties

To see how this idea first developed, we need to go back to 1983. American Express, a company that always sees itself in the role of market innovator, announced that for every purchase made on an AMEX card, a dime would be contributed to the renovation of the then much-corroded Statue of Liberty. By the end of the process, over $1.7m had been generated for the restoration project.

All very patriotic, of course. However, what really made the industry sit up and take notice was the fact that the campaign increased AMEX card usage by 28%. Marketing departments started licking their lips in anticipation, and the ‘affinity’ card market was born. Just about any cause or organisation worthy of public support can now be used by an issuer to market a credit card.

A Convenient Way to Show You Care?

Today there are dozens of affinity cards on the UK market. Many of these have nothing to do with charitable organisations- for example, most Premiership football clubs now have their own card with team colours emblazoned on the front (virtually all issued and run by market giant MBNA). So, if you fancy helping to pay for the solid gold taps in a new Brazilian striker’s twelfth bathroom, then your team’s card is clearly the right choice for you. For those with more of a social conscience however, most major UK charities have their own cards to choose from.

The mechanics of these cards are fairly simple. An up-front donation to the charity is made by the issuer to begin with (usually upon first purchase being made), varying from around £5 to £40. Annual donations may also be made if the card continues to be used. In addition, a small percentage of transaction value (usually 0.25% to 0.4%) is donated every time a purchase is made.

The fairly wide range in card issuers’ generosity levels seems to depend on the relative public sympathy clout (and therefore marketing value) of the individual organisation concerned. Currently topping the list is the World Wildlife Fund (£40 initial donation, 0.4% of transactions plus £2 each year), possibly reflecting the British public’s greater interest in living with an ethical whole-world view, rather than supporting more localised charities.

Seeing Red- or Helping You Breathe More Easily?

However, if you really want to get fashionable and sexy with your donations, then it’s back to those innovators at American Express. The AMEX Red card was launched in the UK in 2006, part of the huge ‘Product Red’ campaign taken up by design-heavy brands like Gap and Apple and promoted by that latter-day world saviour, Bono. A full 1% of the value of all transactions (rising to 1.25% if over £5,000 is spent per year) is given over to the largely Africa-focused ‘Global Fund to Fight AIDS, Tuberculosis and Malaria’. So far $20m has been contributed to this vast $10bn donation bucket from all Product Red lines- an amount somewhat dwarfed by $650m pledged by Microsoft founder Bill Gates.

From a marketing point of view, Product Red can be seen as bridging the gap between ‘charity’ and ‘ethics’. Specific, national charities are all very well, but most people haven’t got the time to sift between the hundreds that exist in the UK alone. Products are needed that give consumers that warm, ethical glow without worrying over the details of which famine, disaster area or other cause best deserves their generosity.

Now Barclaycard look set to raise the bar on ethical vagueness with the introduction of their new green ‘Breathe’ card. No doubt looking to cash in on the publicity generated by this summer’s Live Earth concert, Breathe promises to donate 50% of profits to ‘carbon emission reduction projects’ around the world. “More than anything” croons Group Chief Executive John Varley, “I want my children to be able to look me in the eye and to say with conviction ‘You played your part’.”

Not wishing to dive headlong into the global warming controversy, I would only state that such corporate ‘greenwash’ needs to be taken with a large pinch of salt. For example, Breathe’s marketing makes much of the fact that no paper statements will be issued- but this has long been the aim of all card issuers looking to save on costs. What used to be seen as unacceptable in terms of customer service can now be justified due to environmental concerns.

In addition, specific details of how the 'profit' figure on this product is to be derived have yet to emerge; many group-wide costs have the potential to be cross-charged over. Presumably Barclays will release this information upon the card's launch.

Better Ways of Giving

At the end of the day, applying for a charity or ethical card will always leave you holding a fairly run-of-the-mill credit card. While not totally uncompetitive, these cards will never be market leaders in basics such as APR and balance transfer offers. To contradict HBOS’s Mr Stannard, these cards may not always be an ‘excellent’ way of giving, and you may not always benefit from ‘great deals’. For example, if you have a significant balance to transfer, a far more efficient method would be to look for the longest 0% deal and then donate the interest saved directly to your charity of choice (better still, using tax-efficient Gift Aid).

But maybe efficiency of donation is not the point of charity credit cards. Just like charity Christmas cards (where a very small percentage of the price goes to the charity), the public show of affinity is the most important factor. Just remember that it’s the charity that deserves your support, not your card issuer.

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