2
Do ethical credit cards exist?
Visa credit card in wallet
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF STORY
Bob Moon: Okay, so we heard earlier from consumers about their not-so-fond feelings for credit card companies.
Of course, they're not all bad. In the U.S. some banks have tried to play "good guy" with credit cards that deposit a small percent of your spending into a retirement or savings account for you. In Italy, one bank has a new product that it hopes will lend it some much-needed positive spin. It's got a, well, very "ethical"-sounding name, and it's making some charities happy. But as Megan Williams reports from Rome, there's also an air of cheap publicity.
Megan Williams: At the historic Palazzo Venezia in downtown Rome, a high-end fundraiser is in full swing. The event is to raise awareness of the lack of official birth registration for more than 50 million kids born in Africa each year. Without birth certificates, the children are at greater risk of disappearing into slavery and exploitation.
The Italian organization St. Egidio heads up the campaign and its main sponsor is Italy's second-biggest bank, Unicredit. But what makes Unicredit's support more than a flavour-of-the-month donation, is that its commitment to the campaign is built into one of its products. A credit card.
Frederik Geertman: We call it and ethical credit card. When customer uses it, part of the sum he pays is devoted to charity.
Head of retail marketing for Unicredit, Frederik Geertman, says for every purchase customers make with the card, .3 percent of the total goes toward a cause like registering African kids at birth. A donation the bank makes, not the customer. Unicredit introduced the card a few years ago as a niche product, but it's now more popular than its mainstay credit card.
GEERTMAN: Well, we basically told the branches stop selling the traditional ones and sell this one. So the vast majority of what we're selling in now ethical.
That's good news for Mario Marazitti, spokesperson for the campaign to register kids at birth. He says he prefers the longer-term commitment to one-off donations.
MARIO Marazitti: I think it's a good proposal for the times of crisis we are in because in my opinion we have to create a structural relationship between the first world and the third world, and not just to leave it to charity.
Last year through its ethical credit card Unicredit raised $2 million. That's money Marazitti is happy to tap into.
But as critics point out, "ethical" is a big word for a credit card that donates such a tiny percentage of its profit to charity. An amount that's also a drop in the bucket compared to, say, bank executives bonuses. Unicredit's Frederick Geertman agrees.
GEERTMAN: That's true. Many people make more than that. On the other hand, it's not a good reason not to do something.
Nor, say skeptics, is it a good reason not to do more.
In Rome, I'm Megan Williams for Marketplace Money.
I like the idea of a donation. I appreciate it too though when credit card companies find a way to reward us directly. This one credit card company claimed to reward people with a "permanent" 0% offer, but there was a hitch that could lead potentially to high debt down the road. This guy nearly got tricked by the offer, but figured out the company's underhanded agenda and flipped the whole situation on them. It was pretty clever, and he thus forced the company to reward him as they had promised. Peter Johns $1080.00 savings over 3 years (just paste that into Google to get the detailed blow by blow) really helped him during a crisis.
Concerning the "ethical credit card" story: It is highly likely that the credit card company passes that 0.3% "donation" back to the merchants who initiate the credit card transactions. We operate a pet food and animal feed supply store in Colorado, and the fees which the credit card processing company (called the merchant service provider) charges are taken directly out of our income. Reward cards, like airline flyer mile or Discover Card cost us additional fees since the cost of the consumer's "reward", at least in part, is passed back to us. Sometimes as high as 5.5% of the sale is taken from us by the credit card processor -- there are feed products where this exceeds our margin on the sale. Our average loss to credit card fees runs about 3.3% of sales. For a card company to claim they "donate" anything is probably just marketing jive; it makes them look good but it's the merchants that are actually making the donation...
