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Ditch Charity Credit Cards Give 7x more with the right cards

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If you've got a charity credit card, ditch it now! This isn’t being miserly, it's because there’s a better way; you can donate SEVEN TIMES more, without spending an extra penny. Most charities would only receive a paltry £57.50 if you spent £16,000 on their branded credit card; yet instead there’s a way to get your plastic to give £410!


How charity credit cards work

Charity cards are a hideous scam, selling us poor value credit cards on the pretence that we're doing some good. In reality, it just means more profits for the banks. When you get a charity card, the charity automatically receives between £5 and £25. Yet, after that, most charity cards donate a paltry 0.25% of everything you spend. That's just 25p per £100 spent.

Admittedly, a few charity cards do pay a little more, for example, the MBNA Breakthrough Breast Cancer Credit Card pays £40 to charity if you use your card within 90 days of account opening, and a further £2 for every year you continue with the card, this is in addition to the 0.25%. Yet even so, by taking two simple steps, you can supercharge your charity giving.

How to massively boost the gain

If you use a charity card, ditch it and replace it with the following technique and your chosen charity could be much, much, much better off.

  • Step One. Get a top cashback credit card

    Cashback credit cards are very similar beasts to charity cards; yet rather than paying the charity, they pay you a small percentage of every spend made - this can be up to £5 per £100 spent. In other words, making your charity much more money. So switch to a top cashback card, get more and then donate it.

  • Step Two. Donate the money via Gift Aid so the charity can reclaim the tax

    If you donate money to a UK charity, provided you're a taxpayer, tick the 'Gift Aid box' on the donation form, and the charity can claim back the tax you paid when you earned that money. This means for every £1 a basic rate taxpayer gives, the charity actually receives £1.25, and it doesn't cost or impact you in any way (see charity giving for more info).

    Compare this to the charity cards. There the donation doesn't qualify for Gift Aid tax relief; so for every £1 donated, only £1 is received.

    Plus, Gift Aid works even better for higher rate taxpayers. Declare your donations on your self-assessment tax return, and you can claim back the rest of your tax too. This is an EXTRA 25p per £1.00 you've donated; if you choose to donate this too and in total your charity receives 50% more than it would have done without any Gift Aid relief.

The Top Cashback Cards

Any cashback card paying 1% cashback or more will beat even the very best charity cards. The current top pick is:

  • The American Express Platinum Cashback Card 5% for 3 months and 1.25% after (though £25 annual fee)

    The Amex Platinum* cashback card pays new cardholders a massive 5% cashback on up to £2,500 spending (max £125 cashback) during the first three months. Once this intro offer expires, the rate's an ongoing 1.25% cashback.

    The card has an 14% representative APR on spending, so set up a Direct Debit to pay in full every month or the cashback'll be eaten away by interest charges. Including the annual fee, the card has an 18.7% representative APR.

    There's no cap on the total cashback you can earn in a year, but the £125 intro maximum applies to the first three months, so even if you spent £5,000 in that time you'd still only get £125 cashback. After that, your spending resets to 1.25% cashback on every full pound you spend.

    You can also double your cashback to 2.5% for your anniversary month each year if you spend more than £10,000 in the previous 12 months. The main drawback to this card is the unavoidable £25 annual fee.

    Intro cashback: 5% for 3 months on up to £2,000. Standard cashback: 1.25% on all spending. Min salary requirement: £20,000 Representative variable rate: 18.7%. Official APR examples

For more options see the full best cashback credit cards article

How to make the most of cashback cards

Once you've picked a cashback card, there's a couple of things you should do to make the very most out of it. Sticking to these will maximise your donations, whilst keeping your costs to a minimum.

  • Always repay in full

    If you remember one thing about cashback cards, and charity credit cards too for that matter, then make sure it's the 'Golden Rule'. Only sign up for one of these cards if you can pay the amount off in full every month. Fail to do this and the interest cost massively dwarfs the cashback earned, negating any benefit to you or the charity.

    It's simple to get around this; just set up a direct debit to pay it off IN FULL. Some card providers deliberately miss this option off their Direct Debit forms as it's highly unprofitable for them. If so, just write ‘pay off in full' and send it off; they should honour it, though call up a week or so later to check it's in place.

    Alternatively, you may be better off with a top 0% spending card, this way you can donate some of the interest you save.

  • Use it for as much spending as possible

    Those who can guarantee to pay off in full each month should maximise spending on the card by even replacing debit card, cheque and cash transactions. You can afford to turn your credit card into a debit card, because there's no interest, AND, you're getting paid to spend on it.

    Cashback cards tend to pay out once a year, so at that point you can do the donation in one go or even spread your money across different charities.

Are there any advantages to charity cards?

Maybe a small one, but it won't work for everyone. If you apply for multiple cards that offer a bonus donation when you open them, the charities can get cash without it costing you a penny. Yet this will only work if you have a good credit score.

The more 'credit searches' on your file, the less likely you are to get decent new credit in future, especially with the omnipresent credit crunch. If you are likely to need credit to make debts cheaper, be very careful about how many applications you make for the sake of a few quid to charity. It's probably best just to donate the money yourself.

This is actually a very similar system to the one I talk about in the Credit Card Freebies article, so if you are interested in doing it, it's worth reading my explanation on the impact on your credit score there.

Think before adding the 'insurance'

Payment protection insurance is sometimes sold with credit cards, though less so now than before due to the recent mis-selling debacle. The idea is that it'll make some payments for you, usually for a year, if you are unable to (eg, if you lose your job).

There have been a myriad of cases where it has been mis-sold eg, borrowers didn't realise they were signing up for it, or it was totally unsuitable for them, and some big lenders have been fined. If you think you have been mis-sold PPI visit our Reclaim PPI guide.

The protection isn't always bad, though policies sold with cards are often overpriced (you pay a monthly amount depending on the size of your balance). If you want it, compare the lender's cover with standalone providers such as Paymentcare or Best Insurance.

Always be vigilant and read the small print when signing up for PPI. Check your statements every month to ensure you aren't inadvertently paying for extras that you didn't ask for.

Size of savings

This method does take more discipline than a charity card, but discipline pays substantially. For example, use The Co-op Bank's Save The Children Card to spend £16,000 year (not unreasonable if it replaces debit card and cash transactions) and the charity receives £57.50, including the £15 sign-up bonus and £2.50 extra if the account is used within six months of opening.

Instead, spend on the Amex Platinum* cashback card and you'll receive £275 cashback. Donate this and the charity can reclaim £68.75 Gift Aid on top. Plus, higher rate taxpayers can reclaim the tax, if they choose to donate that too it's a further £68.75. Overall it means it's earning £412.50 compared to the charity card's paltry £57.50.

Spending of £16,000/year

Cashback/Charity Payment
Amount the charity receives
The Charity Gains
Basic Rate
Higher Rate (1)
Save The Children card
£57.50 (2)
£57.50
£57.50
-
Amex Platinum
£275
£343.75
£412.50
£355
(1) Assumes tax reclaimable is gifted to charity as well (2) £15 sign up fee, £2.50 for spending on it, and 0.25% of transactions


Glossary

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