Taxpayer-owned Lloyds Banking Group (LSE: LLOY.L – news) is pulling out of the charity credit cards
market, because it says that offering cards that donate to good causes is “no
longer cost-effective”.

The company has been offering these cards for over 23 years, but has written
to customers informing them that their charity cards will be replaced by
standard credit
cards that do not offer a charity donation.

The charities hit by the withdrawal include Cancer Research UK, which has
received over £15m from the credit cards. as well as the NSPCC and the
Scottish SPCA. Lloyds said it had offered to help each charity find a new
issuer “should that be the route they wish to pursue in the future”.

Charity credit cards, which are still offered by other providers such as MBNA
and the Cooperative Bank, work by donating a small percentage of the amount
spent on them to charity. Typically the charity also receives a larger
amount th first time that the card is used.

For example, the Co-operative bank’s Action Aid Credit Card donates £15 for
every account opened, then a further £2.50 if the card is used within 6
months. It then donates 25p (0.25pc) for every £100 spent on the card and
25p for every £100 transferred to the card. The Virgin Charity Credit Card
(which lets you choose from over 2,500 charities) donates 0.8pc cashback,
which is topped up to 1pc if you sign up for Gift Aid) on all spend. The
Lloyds cards typically made a one-off donation of around £20 the first time
they were used and then a continuing cashback payment of between 0.25pc and
0.5pc on spending.

A spokesman for Lloyds said that the the cards were held by fewer than one per
cent of its customers. “Following a recent review, which noted the
limited demand for charity cards in recent years, we have decided that we
will no longer offer a charity credit card. We remain committed to
charitable giving and will work to support Cancer Research UK, NSPCC and the
Scottish SPCA in any way we can in the future.”

David Black, banking analyst from financial analysis group Defaqto, said that
the cards were often a poor deal, and that charities would offer be better
off if you chose to support them in other ways.

“I can’t help thinking that both you and the charity would get a better
deal if you chose the most competitive credit card available from the entire
credit card market so for example the one with the longest 0pc
introductory deal if that’s what you’re after and then make a donation to
the charity separately,” he said.

He added that the longest 0pc introductory deal on charity cards was just six
months, compared to 18 months in the rest of the market, while the lowest
APR for a charity card is 12.9pc compared with 6.9pc overall.

Article source: http://uk.finance.yahoo.com/news/lloyds-bank-pulls-charity-credit-141605742.html