Charity Begins in Your Wallet with Affinity Cards
Everyone has a list of their favorite things in life. Do you like a specific sports team? Are you proud of your college or fraternity? Do you support a charity or social organization?
If so – and a substantial number of people fall into these categories – then you might be a candidate for an affinity credit card.
Affinity cards are credit or debit cards that align the customer with a specific organization via branding and imagery. For example, in the case of football fans, you can proclaim your loyalty to the Green Bay Packers with their logo affixed to your plastic. Or if you believe in the battle against breast cancer, then your card can display that for the Susan G. Komen for the Cure Foundation. And if dear old alma mater is close to your heart, then you can remember your college or university by placing its image upon your card.
Retailers, shopping centers, universities, professional groups, sports teams, airlines, and particularly nonprofits and other membership groups have taken up the affinity card cudgel. These groups and organizations partner with credit card companies in a win-win.
It works like this: The organizations introduce the credit card companies to their audience (a major benefit at a time of falling new card sign-ups). In turn, the credit card companies may offer rewards, discounts or in some cases a revenue/profit-sharing venture on fees, charges and credit limits.
A CAUTIONARY WORD
Keep in mind, despite the benefits, affinity cards are still regular credit cards. Your interest rate and credit limit will be determined by your personal credit history. And you should read the fine print to determine any penalties or hidden fees that may emerge with late payments or other issues. The Packers won’t help pay your bills.
The joint ventures on cards are funded by the interchange income. That is a transaction cost where the card issuer deducts the interchange fee from the amount it pays the bank that handles a credit or debit card transaction for a merchant.
The number of available affinity credit cards was sliced by major banks in the wake of the Great Recession of 2008. The percentage of consumers possessing affinity cards fell from 55 percent in 2009 down to 43 percent in 2013, according to market research firm Packaged Facts, which issues an annual report on affinity cards.
Still, about 43 percent of United States adults have at least one co-branded or affinity card in their wallets and purses. By the end of the year in 2014, co-branded cards accounted for 31 percent of general purpose credit card purchase volume. That’s $809 million out of the $2.63 trillion dollars generated that year by Visa, MasterCard, Discover and American Express. That adds up to a decent amount of passive income for some nonprofits and other organizations.
WHAT’S IN IT FOR YOU
The good news in the declining number of affinity cards means that consumers can benefit from increasing enticements to sign up, including bigger rewards, better card features and benefits, and increased percentages donated to charities.
The charitable donations can be a windfall for any charity. The Susan G. Komen for the Cure card generates $3 for each new account, and .20 percent of net retail purchases back to the charity, per dailyfinance.com.
Similarly, the Working Assets Visa from Bank of America donates ten cents from every transaction to an array of 40 different progressive organizations. Bank of America also has a partnership with the Nature Conservancy that donates $100 after certain transactions, additional percentages with each purchase, and plants a tree in Brazil for every year a card user remains active.
And in perhaps the biggest affinity deal, the World Wildlife Fund reported that it had raised more than $10 million during a 12-year relationship with JP Morgan Chase & Company.
The key with any affinity card is to stay with the program. Most cards reward loyalty and make an additional donation based on your longevity, since the cost of acquiring a new customer can be substantial, particularly in these competitive times. Keep that in mind when you do the actual calculations on your donation.
If your card will donate a certain percentage of each transaction, determine how much you are likely to spend using that card. If you charge about $5000 a year and there’s a deal in place for the charity to get one percent of that, that’s $50 per year. That’s not insignificant when multiplied over a substantial number of people, but keep in mind that you typically can’t deduct that amount from your taxes as you could if you made a direct donation.
Another factor to consider is the ethical stances by the major banks that are behind the cards. If the bank donates a half-cent to your favorite charity, but then makes a substantial donation to a political candidate or cause that you abhor, are you really contributing to the greater good of society? In some cases, you may be merely putting a band-aid on your conscience for being a part of that machine.
One bit of good news about being an affinity card member comes with your use of digital wallets and mobile payments. Many digital payment forms instantly notify you of how much money is being donated from your purchases. This real-time feedback lets you know instantly whether your contributions are adding up from your daily activities and shopping. That can be an ego boost as you sip your morning take-out coffee.
Still, as with any credit card, be cautious in what you take on. Your credit score can be affected by any new card activation, and if you don’t carefully read the fine print, you may find that the fees and penalties associated with your new card may be onerous. And certainly, responsible debt management means that you carefully consider whether you need another card. No matter how good the cause, if you take on more debt than you can responsibly handle, you’ll hurt your favorite charity – you.
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