Charitable giving by card gets a boost from the Chancellor

Tax breaks introduced in Gordon Brown's recent Budget are predicted to boost charitable giving by £400m over the next year.

From April 6, the Government will add 28p to every £1 a taxpayer gives to charity. Give directly from your gross pay, through your employer's payroll, and the Government will add an extra 10 per cent for the next three years.

The changes make the UK one of the most liberal tax environments for charitable giving in the world, and will raise tax-effective giving from £1.6bn to £2bn a year.

These sums make the millions raised for charity each year through donation or affinity credit cards look like small beer, but the organisations that benefit will tell you every little bit helps.

Affinity cards are either Visa or MasterCards and work in much the same way. They are issued by major banks, such as Bank of Scotland, Co-operative Bank, Halifax and HSBC. The difference from their ordinary cards is that they are jointly issued with a charity or other organisation, and instead of offering loyalty points or Air Miles, a small percentage of your spending is diverted to their coffers.

The donation may be small, typically 25p for every £100 you spend with the card, but with millions of users around the country the sums can soon add up. A one-off payment, typically £10, is also given to the organisation when you first take out a card.

Estimates suggest there are at least 1,400 card schemes in the UK accounting for more than 10 per cent of all credit cards issued.

Bank of Scotland, which issues affinity cards for almost 600 groups, says the scheme has raised more than £16m for members since its launch in 1990. This year the Bank expects to pay £3m to participating affinity groups.

"Affinity cards are growing in popularity," according to Chris James, manager of the Bank of Scotland affinity card division. "People like them because they believe they are doing some good by diverting their spending to charities."

But charities are not the only organisations to benefit. Schools, university alumni, trade unions, political parties and professional bodies also issue affinity cards, as do the Star Trek and Elvisly Yours fan clubs. Football clubs have also seized the opportunity. Bank of Scotland counts Arsenal, Aston Villa, Derby County, Glasgow Rangers and Leeds United among its affinity card members. Lincoln City also get a look in.

Mr James says people take out cards for three reasons. "They get a sense of belonging to the organisation and are happy to help it financially, they get competitive interest rates, and carry a card with an attractive picture or design."

The Greenpeace card has a picture of the Rainbow Warrior, while the World Wildlife Fund offers the choice of a giant panda or Siberian tiger.

Sums raised by individual charities can be sizeable. The RSPB has earned £3m from its 100,000 cardholders since 1989, the National Trust £2m from 65,000 cardholders since 1990, the RSPCA £1.5m from 96,000 cardholders since 1993 and the World Wildlife Fund £1.2m from 60,000 cardholders since 1997. The Labour Party has also done well, raising £1m.

The most successful fundraising card is the Halifax Visa Charity Card, which has raised £12m from 230,000 cardholders since 1988 with the money going to help three charities, Imperial Cancer Research, British Heart Foundation and Mencap.

Jonathan Moakes, associate director of Affinity Solutions, says the cards present a win-win situation. "The bank gets more customers, the charity earns extra income and the customer has the satisfaction of helping an organisation at no cost to themselves."

So how do interest rates compare with normal credit cards? The affinity card members claim you get competitive rates, but you rarely get the best deal on the market.

Co-operative Bank cards, issued to Amnesty International, Greenpeace, Help the Aged and Oxfam among others, charge 19.8% APR on purchases. HSBC cards, which include Carecard, National Trust and Shelter, charge 18 per cent, while Bank of Scotland cards charge 19.9 per cent.

By comparison the Egg Visa card charges 9.9 per cent APR on purchases.

Some affinity cards offer reduced rates for a limited introductory period. Comic Relief charges 7.9 per cent APR on purchases for the first six months after issue, while Halifax Visa charges 9.9 per cent.

Again, lower rates are available elsewhere. Tesco Visa charges 4.9 per cent until January 1 2001 while Capital One Bank charges 3.9 per cent for the first six months after issue.

If you have a large balance left on your credit card at the end of each month, charity cards could cost you dear, and you should consider switching. You could always donate the money saved to your favourite charity, rather than letting the Bank pocket the extra interest - this could notably boost your monthly donation.

A spokesman for the Co-operative Bank says the majority of affinity cardholders clear their balances at the end of each month, many more than for ordinary credit cards.

Donations depend on the money you spend and not on the size of your outstanding balance, so there is no loss to the charity if you clear it each month. If you are among those lucky enough to clear the balance, then charity cards present a much better deal.

The amount donated varies depending on the card. The RSPCA receives just £2.50 each time a new card is issued, but most other organisations earn at least £5. Artscard, which diverts money to 79 different arts organisations, Cancer Research Campaign, Carecard, English Heritage, National Trust, RNLI, RSPB and Shelter all receive £10.

Most cards donate 0.25 per cent of the value of purchases, but Cancer Research Campaign and UNICEF donate 0.5 per cent, while the donation given to Comic Relief is increasing to 0.6 per cent.

Few donation cards charge holders an annual fee, although Halifax Visa may charge a £10 fee after the first year, unless you spend a minimum amount over the course of a year.

If you want a card, approach the charity direct rather than the issuing bank. You do not have to be a member of the bank or be an existing supporter of the charity or organisation named on the card.

Affinity groups are trying to work out whether the recent Budget changes will help them, although it seems unlikely. But they remain confident that continuing growth in plastic giving is on the cards.