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Mixing politics and credit cards

By Janna Herron · Bankrate.com
Friday, September 7, 2012
Posted: 4 pm ET

Would you flash a red Elephant Visa or a blue Donkey MasterCard to support your presidential candidate? Up until two years ago, it wasn't legal. Here’s why.

An interesting story in Bloomberg Friday details how the Republican and Democratic parties in the late 1970s issued "affinity cards" to raise money. The cards either paid them a small percentage of the cardholder's purchases or a flat fee for each new account.

Some Democrats questioned whether political parties and banks were getting too friendly and called for hearings. Others wondered if the program sent mixed messages as inflation was rising.

The blue party abandoned the practice, but the GOP kept at it until 1979, when the Federal Election Commission said the program violated a federal law that banned national banks from contributing to political campaigns.

Fast forward to 2010 when the Supreme Court overturned campaign-finance laws that barred corporations from donating to political campaigns. That opened the door for another run at political affinity credit cards.

In general, affinity credit cards are associated with a charity or an alma mater. They attract consumers by making them feel virtuous about their spending. Issuers also come across as noble, because they're donating part of their profit to something you love.

But let's be honest, credit card companies aren't being too generous. What they give up is tiny in most cases, often less than 1 percent of every purchase. (That's less than the redemption rate on nearly all credit card rewards programs.) You'd probably make more of a difference writing a check each year or donating a portion of the rewards you earn on your current credit card. At least, you can write it off on your taxes every year, instead of letting your issuer get the break.

Another consideration is the bank's activities, and if they conflict with your charity's mission, says Joe Ridout of Consumer Action. He recalled that one affinity credit card targeting the gay community was issued by a bank that donated tons of money to an anti-gay group.

"Look at what your bank really stands for," he says. "The larger point is that you have to look beyond the card's design, and find out what kind of practices the bank is engaged in, and if the card is financially advantageous for you."

Perhaps the lesson here is that credit cards and causes you support don't need to mix.

What do you think?

Follow me on Twitter: @JannaHerron

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