The Labour Party credit card comes under attack for charging sky-high interest rates. Are affinity and donation cards worth having?
I was very amused this week by an article in The Times which criticised a credit card issued on behalf of the Labour Party. The Times revealed that the affinity card, issued by the Co-operative Bank, charges a yearly interest rate of 18.9% APR on purchases. For cash withdrawals, the interest rate leaps to 23.9% APR, plus hefty withdrawal fees on top.
Last week, the Bank of England cut its base rate to a mere 2% a year -- the lowest level in the Bank's 314-year history. In response, the government warned mortgage lenders to cut their rates or face the wrath of the Cabinet. Hence, it's a bit rich that a Labour-branded card is charging a sky-high interest rate of almost ten times the base rate!
Please give generously...
Then again, I suspect that most Labour Party supporters will be sensible types who -- like me -- avoid paying even a penny in interest by always paying off their monthly bill in full. By doing so, they can enjoy up to 59 days of interest-free credit. Thus, the interest rate charged is not an issue for `full payers'.
What's more, in common with other so-called `donation' cards, the Labour Party gets a cash donation (£15) when an account is opened, another when the card is first used (£2.50), plus a share of all spending (25p of every £100). Thus, the main reason why 15,000 supporters use this card is so that the Labour party can benefit from this ongoing stream of donations. Indeed, this plastic has raised more than £1 million for Gordon Brown and his merry crew.
For the record, here's how Labour's card compares to those on offer from rival political parties:
Political party | Card issuer | Interest rate (purchases) | Interest rate (cash) |
|---|---|---|---|
Conservative | MBNA Europe | 15.9 | 27.9 |
Labour | Co-operative Bank | 18.9 | 23.9 |
Liberal Democrat | Co-operative Bank | 18.9 | 23.9 |
...but better cards are available
Now let's consider the alternatives: according to the Fool's independent, unbiased search engine, these credit cards charge the lowest standard interest rates:
Card name | Interest rate (purchases) | Interest rate (cash) |
|---|---|---|
Barclaycard Simplicity Visa | 6.8 | 15.8 |
8.5 | 25.94 | |
Lloyds TSB Advance MasterCard | 11.9 | 27.9 |
As you can see, political-donation cards are fairly uncompetitive, as their interest rates are far higher than those charged by the Best Buys shown in my second table. Indeed, as I warned a year ago in The Nicest Christmas (Credit) Cards, I'm not a big fan of affinity, charity and donation cards in general. Although these donation cards provide payouts to charities and good causes, sports clubs and other organisations, it's far better to have a table-topping cashback credit card and donate your annual rebate via Gift Aid. By doing so, you can easily double the reward paid to your chosen good cause.
Why pay any interest at all?
Finally, if you have a good payment record and an unblemished credit history, then paying interest is purely optional. For example, you can avoid paying interest on purchases for up to ten months with a Best Buy 0% on purchases card. Likewise, by transferring existing card debts to a 0% balance transfer card, you can stop the clock on your interest bill for up to sixteen months. Now that is interesting!
More: Find cracking credit cards today | Is This Really The Best Credit Card On The Market? | Secure A Great Savings Rate Today