The Ethics of Credit Cards

By Daniel Chandranayagam

Anyone empathizing with Rebecca Bloomwood in Confessions of a Shopaholic might wonder if credit cards could ever be ‘ethical’. But ‘ethical’ proves to be an attractive communications tool, so what is said to be the world’s first ethical credit card, the ‘think’ card hit the UK markets for the conscientious shopper. That is not to say that shopaholics like Ms. Bloomwood would not suffer under the hands of a debt collector upon failure of timely payment, but the card offers ethical consumers a lower interest rate for purchases of designated ‘ethical’ items.

According to reports, ’think’ partners have been carefully chosen for their ethical practices. Selected with advice from the Ethical Consumer Research Association (ECRA), chosen partners cover a wide range of sectors and have leading positions on a battery of ethical issues such as animal welfare, energy efficiency, fair-trade and sustainability.

A product of the Co-operative Bank, the ’think’ card also gives users the satisfaction of knowing they have helped the environment, as the Co-operative Bank will purchase half an acre of Brazilian rainforest in the customer’s name when . the card is first used. Moreover, for every £100 spent on the card the bank donates 25p to RSPB’s Indonesian Rainforest project.

However, ‘think’ is not the first ‘ethical’ card on the market. The American Express RED card offers to donate a percentage of all purchases towards fighting Aids in Africa.

Meanwhile, MasterCard, for example, claims that it is known globally for having among the highest standards of professional integrity and ethics in the business community. Visa is committed to financial literacy programmes to help people spend more wisely. It helps more than 20 financial literacy programmes in countries including Mexico, Indonesia, Brazil and China.

Still, there is the question of whether ‘ethical’ is being used to hype a product to the world’s current standards. After the economic meltdown and various revelations of corruption and fraud, it is hardly surprising that most people are looking for ‘clean’ or ‘ethical’ products. In fact, that is the reason why an editor at a finance publication said that Islamic Finance is gaining popularity. Is it all a marketing ploy?

Martin, of MoneySavingExpert.com, wrote on his blog:

Yet when I looked through the details I was shocked. What you actually have is a rather nasty case of charitable marketing; trying to lever people conscience to sell them a very poor product. Here’s some examples of issues with this card.

A standard APR rate of 14%.

Yet elsewhere you can get a 0% card for spending lasting for 12 months, with an interest rate just a smidgeon higher thereafter. Alternatively, you can get a card with a flat rate of 6.8% APR. Is it ethical to charge so much more than people can borrow for elsewhere.

The cheap rate for ethical partners isn’t cheap.

If you buy something from one of its 16 partners, you are charged 7% APR,. Yet, as I note above, there are cards which charge less than this as a standard rate! Not only that but the 7% only last for 6 months after each purchase with Co-Op.

Martin lists a number of other objections he has to the card being called ‘ethical’. He then says:

… my top deals in the Best Cashback Cards article are Amex has a cashback card paying 5% cashback for the first three months followed by up to 1.5% and Capital One 4% followed by a flat 1%. Whereas Co-Op is donating just 0.25% to charity. Plus by using cashback cards then donating the cashback the charity would get you tax back on top. Meaning roughly over a year a basic rate taxpayer spending £10,000 a year would be donating £25 with Co-Op whereas around £225 with one of the cashback cards; nine times more.

Still, it is likely that a d0-gooder card will be attractive to shoppers, as they know that their cards do something aside from just charging interest upon interest every month. It is surprising that consumer banking in Malaysia has not caught on with this product, as it is likely to capture the imagination of the Malaysian shopper. Even though there might be pitfalls to the deal, it is good to know that something is being done for the environment or community because of your shopping.◊

Other links to ethical credit cards:

• Do Ethical Credit Cards Exist?
• Green Credit Cards
• Responsible Credit Cards: Myth or Reality?

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