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Understanding charity credit cards

What are charity credit cards?

Charity credit cards work in much the same way as other credit cards in terms of the way they are used, paid off and the way that they charge interest on spending. The difference here is that a charity credit card will have a link to one (and sometimes more than one) charity. When a consumer signs up for a charity credit card the credit card company will commit to making a one off payment to the charity. Then, every time the consumer uses the credit card when out shopping the credit card company will give a percentage of the spending they make to the charity as well. Charity credit cards will usually be branded with the charity name, logo or design. In all other respects, charity credit cards are the same as standard credit cards.

The benefits of taking out a charity credit card

A lot of UK consumers are taking out charity credit cards nowadays. This can be a quick and simple way of using your credit card spending to also make a difference to a UK or global charity. Credit card users will still be spending on their cards in the normal way but -- every time they use their credit card -- their credit card provider will make a percentage payment to the charity as a donation. And, when a consumer takes out a charity card in the first place the card provider will make a larger one-off donation. So, this is an easy way to make sure that a charity benefits from consumer spending on a regular basis without having to make a specific donation. Every time a charity credit card user uses the card to buy something, the charity will get something back too.

How to choose a credit card

Choosing a charity credit card should be based on much the same criteria as choosing a standard credit card. Some individuals, however, do want to choose to take out a card that supports a favourite charity. Others need to look for charity cards that offer the following:

The best deals for the charity -- not all charity credit cards will give the charity the same payments/percentages so it's worth shopping around to find the one that will give the best donations.

The best balance transfer rates -- if looking to take on a charity credit card to transfer the balance(s) from other credit cards then look for the one with the best balance transfer deal. This may involve a period of interest free credit on the funds that are transferred and/or a period of interest free or low interest charged on new purchases. These deals may involve the payment of a fee so check that out at the same time.

The best promotional interest rates -- many credit card companies, including charity card providers, will offer special promotional deals which can be good value to consumers taking out a new credit card. These offers may include 0% interest rate periods (i.e. the card provider will not charge interest on new purchases for a specified period), balance transfer deals and low interest offer periods.

The best long-term APR -- the APR (Annual Percentage Rate) is the interest rate that is charged on an annual basis for credit card use. This is the rate to compare when taking out a charity credit card when looking at various products. It's important to weigh up the APR against any special offers or promotional benefits given when taking out a credit card for the first time. A good introductory interest rate or deal will not be so attractive later if the long-term APR that is charged is a lot higher than that given by other cards so it is important to look carefully at the APR before coming to a decision on which charity credit card to take out.

The best purchase protection -- purchase protection is a guarantee given by a charity credit card provider when a consumer takes out and uses a credit card. So, if a consumer has a problem with something that they purchased using their credit card the card company will make a commitment to give compensation if there is a problem with the supplier/shop where the purchase was made.

Things to remember when applying for a charity credit card

Some consumers think that they may as well apply for a few charity credit cards so that they can help out as many charities as possible. It's wise to be careful when applying for any kind of financial product as applying for too many products here can actually have an adverse effect on a consumer's credit rating/score.

Every time a consumer in the UK applies for a financial product such as a credit card, they leave a 'footprint' on their credit rating. This basically means that financial companies that need to check out a consumer's credit rating/score can see the applications they have made and whether they have been accepted or turned down for the financial product(s) in question. When a consumer applies for too many credit cards or is turned down by a financial services company then that can start to affect their credit score. This can turn into a vicious circle -- if a consumer's credit score is adversely affected then future financial providers may not want to deal with the consumer in the future. This will -- again -- leave another 'footprint' and may have further negative effects on credit scores and ratings in the future.

Conclusion

Taking out a charity credit card doesn't just make it easier when out shopping -- the spending a consumer makes on a charity credit card could also have a direct benefit for a charity or charities of their choice. It is, however, still important to remember to check out charity credit cards to find the one with the best deals and APRs before choosing to apply for one. This way, any consumer will get the best deal and will not be charged too much for their spending if they do not repay their credit card balance every month. Finally, remember to tread carefully when applying for charity credit cards so as not to have an adverse effect on credit ratings/scores.