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By Philanthropy UK
Highlights
- With affinity cards, your bank makes a donation to a named charity every time you use them.
- You should compare charity cards to establish the standard APR charged as well as how much the chosen charity will receive.
- Affinity cards are not tax efficient.
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Spending on credit cards is common practice nowadays, and another way of helping good causes is to swap your standard card for one of the many 'affinity' or ‘charity’ cards on the market.
You do not receive tax relief on the amounts the charity receives, but it is a painless way of creating extra income for your chosen charity. Charity cards are provided by many banks. They work just like ordinary credit cards, except that instead of offering 'air miles' or other 'points' they make a donation to a named charity or cause every time you use them.
Many banks now offer ‘charity’ credit cards and usually donate £5 or £10 to the cause the first time you use them and, from then on, up to £1.25 (depending on the card) for every £100 spent – which is paid by the bank, not by you as a charity affinity credit card holder. This may not sound like much, but these small donations soon add up. You do not have to be a customer of the particular bank issuing the card to support a chosen charity in this way.
f there is a cause you would like to help in this way, the first step should be to contact them directly to see if there is a particular card that they benefit from. They should be able to give you a form you can use to apply to the issuer for a card.
It is worth comparing charity credit cards (unless you have a specific cause you wish to support) to establish the standard APR charged as well as how much the chosen charity will receive with each purchase you make. Fair Investment, a financial comparison website, provides a wide range of comparisons for charity credit cards.
The most high profile affinity card launched recently is the American Express RED credit card. When you use the RED card, you generate valuable donations to support RED's work to fight AIDS and HIV in Africa through special partnerships with leading companies, such as American Express, at no cost to yourself. RED offers a generous donation, paying 1% of annual spend up to £5,000, and 1.25% of any further spend.
Amongst other choices, Courtesy of Coutts, the loyalty scheme attached to the Coutts World and Gold Cards, offers clients the opportunity to donate the points they earn to any of three selected charities: The Woodland Trust, Alzheimer's Research Trust and Rainbow Trust Children's Charity.
Affinity cards cost you nothing to use if you clear your card balance each month, but because they often have higher than average APRs, they may not suit you if you borrow regularly on your credit card.
Ultimately, however, they are not a tax-efficient route to giving and, if you do use a credit card regularly, a more tax-efficient way which is also more profitable for charities is to get a cashback credit card. Although similar to a charity card these pay you a small percentage of every spend made.
The biggest difference is that the best cashback cards pay you substantially more than charity cards pass on to your chosen good cause. You get more money and then can donate it to your chosen cause and claim Gift Aid in the process. This means that for every £1 a basic rate taxpayer gives, the charity actually receives £1.28 compared to a flat £1.00 via a charity card.
© Copyright 2009 Association of Charitable Foundations (ACF)
Every effort has been made to ensure that the information provided in A Guide to Giving is current at the time of publication (December 2009), but the Association of Charitable Foundations (ACF) cannot guarantee its accuracy. Furthermore, there may have been subsequent changes to legislation, policy and/or to tax bands and rates. If you are considering any investment you should seek appropriate professional advice. This guide is not intended to replace professional advice on particular investments or the manner in which tax relief is applied under any scheme, and you should not rely on it for such purposes. You are responsible for your own tax and financial affairs and so should seek independent advice. ACF can not accept responsibility for the investment choices you make.
Views expressed in A Guide to Giving are not necessarily those of Philanthropy UK or the Association of Charitable Foundations.
Coutts & Co is not responsible for the content of A Guide to Giving, and the content does not constitute any advice whatsoever from Coutts & Co. The case studies and profiles within the Guide are not necessarily clients of Coutts & Co. Coutts & Co shall not be liable for any loss whatsoever arising from your reliance on any information produced in the Guide.
