Nonprofit organizations around the country stand to benefit from affinity credit card programs, sometimes called a charity credit card, which allows supporters to donate a percentage of each transaction to a particular organization.
Affinity cards are branded with the organization’s logo and offered in conjunction with three entities- the nonfinancial organization, a payment network, and a card issuer. Numerous small and mid-range nonprofits are increasingly dependent on the incremental revenue that their supporters generate with affinity cards.
This affinity card concept can be attributed to the late Charles Cawley who graduated from Georgetown University before co-founding the Maryland Bank National Association (MBNA). The first organization to partner with Cawley on his idea was the Georgetown University alumni association who sponsored a card for their members. This model flourished under Cawley making MBNA one of the largest affinity card issuers in the industry.
In 2006, MBNA announced their acquisition by Bank of America. Before the acquisition, MBNA supported thousands of organizations with affinity card programs, a niche that they skillfully served for many decades. With MBNA came millions of cardholders who carried affinity credit cards in support of their favorite nonprofits, schools, and professional organizations. About 10 months after purchasing MBNA, Bank of America announced the roll out of at least 12 new programs with organizations such as the National Wildlife Federation and Habitat for Humanity International.
Affinity Card Programs and Big Banks
When it comes to affinity cards, banks do not typically stand to increase their scale unless the partner organization has an enormous captive audience and strong reputation. Bank of America offers an affinity card with Susan G. Komen, a brand with international recognition and millions of charitable donors whose affinity for the cause runs deep. This partnership is mutually beneficial since Susan G. Komen earns incremental fees for new and renewed accounts plus a percentage of cardholder purchases while the bank earns a small percent on transaction fees. Smaller nonprofit organizations are less ideal partners for large banks who have the capacity to offer affinity credit cards. Bank of America for example considers developing affinity credit cards for organizations with a donor list of 750,000 or more.
A Shift to Affinity Credit Cards
Dozens of banks have prospered in part by the profits they accumulate on own-branded or house branded cards. Popular examples are the American Express Blue Card or the Chase Sapphire Reserve which are branded with the name of of the issuing bank instead of an outside organization like an affinity card. While these own-branded cards offer some serious rewards to cardholders who bring in substantial revenue for the issuing banks, the banking industry has shifted focus to affinity card programs. Why? Banks have realized the power of cross-selling, expanding their market, and customer retention.
By 2015, about 43% of adult consumers in the United States carried at least one affinity credit card. While the house branded cards boast significant rewards packages, the consumers who qualify to carry these cards are a finite group. In contrast, millions of consumers have been willing to earn less rewards in exchange for branded cards that display and benefit their favorite charities. Institutions such as Chase, Citi and Bank of America have realized the demand for affinity credit cards and offer a number of charity credit cards with select nonprofit organizations.
Popular Affinity Credit Cards for Nonprofits
One of the most well known charity credit cards is the aforementioned mentioned Susan G. Komen Credit Card. The organization earns $3 for generating new cardholders and renewals and the recurring revenue generated for the charity is 0.08% on every purchase.
Another affinity card offered by Bank of America is the World Wildlife Credit Card which boasts an identical donation model to that of the Susan G. Komen program.
Similar programs with lesser rewards are the Bank Americards that benefit the Nature Conservancy and Defenders of Wildlife. The Sierra Club organization earns a percentage of spending from their supporters that is set by the issuer, TCM Bank.
Another more flexible charity credit card is the Charity Charge World Mastercard which allows cardholders to earn 1% cash back on purchases for any nonprofit in the country.
Interest Rates on Affinity Credit Cards
Each of the previously listed cards have similar interest rates and offer rewards programs with no annual fee to the cardholder. Here is just a quick comparison of the interest rates for the three cards
Bank of America affinity card
- 0% APR for 12 months on purchases and balance transfer
- APR ranges from 13.99% to 23.99% after year one
Sierra Club Bank Americard
- 0% APR for the first year
- APR ranges from 10.99% to 20.99% after year one
Charity Charge World Mastercard
- 1.99% Introductory APR on purchases and balance transfers for 6 months
- After 6 months, there is a rate of prime plus 6.99% to prime plus 16.99% APR