Charity credit card offers improving -- but are they the best deal?

By Benjamin Salisbury

If you're looking for a way to give to charity, you may consider a charity credit card. In theory, it's a perfect solution -- you can spend as usual and donations are automatic. However, you may not be donating as much as you would like through charity credit cards alone, and the card may have a hefty interest rate to top it all off.   charity-credit-card

How much do charities actually get?
The bank will usually make a larger initial donation when you open your account or when you make your first purchase. Initial donations vary between charity cards. For instance:

After that, a regular amount goes toward the affiliated charity after you spend a certain amount. Usually 25p is donated for every £100 you spend on the card, though some charity cards are improving that rate.

Balance transfers may earn charities extra as well. The WWF receives £10 if you transfer a balance to its charity card within the first 90 days of the account opening, then 40p for every £100 spent on the card and £2 for every year the card is active. The BHF receives £10 if you transfer a balance within the first 90 days and 35p for every £100 spent on card purchases after that.

The donations may seem small but they add up. The RSPCA has received more than a million pounds from its charity credit cards; WWF has earned £13 million from cardholders in its nearly 20-year-old partnership with MBNA.

"The WWF Credit Card raises significant funds each year, enabling us to carry out vital conservation work around the world," Nicky Day, director of corporate partnerships at WWF-UK, said in an emailed response to questions.

Charity card rates tend to be high
For consumers, the good news is there have been improvements to the terms of some leading charity credit cards, the bad news is these start from a fairly uncompetitive base. For example, interest rates are not the best on the market.

The APR on the BHF and WWF cards and others from MBNA is 18.9% -- nearly three times higher than the 6.6% rate on MBNA's low rate credit card. The Oxfam charity credit card offers a lower 12.9%.

But balance transfer terms are improving on some of the leading cards. For instance, the BHF card offers a 0% interest rate for 31 months on balance transfers with a 2.88% fee. Those terms are not far off the longest available balance transfer period, at 34 months. The RSPCA credit card has 0% interest for 24 months on balance transfers with a 2.99% fee and 0% for 6 months on purchases.

Other ways to give back via credit card spending
In purely financial terms, there are better alternatives both for you and your favourite cause than charity credit cards. By using the most lucrative cashback credit card, spending £10,000 a year and taking advantage of initial cashback rates of up to 5%, you could earn £200 in a year. If you then pay all of that to a charity, it is more than double the amount you would donate using best paying charity credit card from WWF, which would contribute £40 initially and £40 in transaction donations.

You could also boost donations by combining cashback receipts with Gift Aid. Gift Aid is an Inland Revenue approved scheme by which a UK taxpayer giving the money will fill out a declaration form for the charity, which means the charity receives your donation and the tax relief (currently 20% in the UK). This means if you donate £80, the charity will actually receive £100.

Still, the benefit of charity credit cards is that your donations are automatic. After you apply for the card, you don't have to take any extra steps to make a gift to the charity. If you're busy, or just plain forgetful, that could be the best way of guaranteeing you make at least some sort of contribution to an organisation in need.

See related: Giving back with your credit card; How to protect yourself from charity fraud

Updated: 30 October 2014