Charity credit cards – giving generously? - Expert opinion from uSwitch

Lloyds Banking Group this week announced it was scrapping its Halifax and Bank of Scotland branded charity credit cards. Charities such as Cancer Research UK and the NSPCC have benefitted to the tune of over £15m from the cards over the 23 years they’ve been around.

The bank said it was still committed to charitable giving, but that demand for the cards had slumped heavily in recent years and they were no longer proving to be cost-effective.

At first glance, the move might seem a bit mean-spirited. Last December, research from the Office for National Statistics found that while more people are giving to charity, the average amount being donated has fallen. Charities are struggling, and they clearly need every pound that comes their way.

Yet, the truth is that charity credit cards have never really been the most effective way to donate.

Cashback vs charity cards

Take cashback credit cards. Where most charity credit cards give just 25p for every £100 spent, cashback cards offer far greater rates of reward which can then be donated to the charity of your choice.

For example, if you spent £250 a month on Capital One’s World Mastercard, which pays 5% cashback for three months and up to 1.25% after, you’d receive £48.75 in cashback over a year. The same spending on the Co-operative Bank’s Christian Aid charity card – one of the best charity cards on the market – would net the charity just £25.

Then there’s Gift Aid, the government scheme which allows charities to reclaim tax on your donation. Gift Aid means that your £48.75 in cashback would be worth £60.94 to the charity with basic rate tax, and £81.25 for higher-rate taxpayers – that’s more than three times as much as the charity card.

The main benefit of a charity credit card is that it does most of legwork for you – all you have to do is spend money on it and the card will take care of the donating.

But while giving to charity via a cashback card requires a bit more effort, the numbers speak for themselves – cashback credit cards beat charity cards hands down.