Sunday, November 4, 2007

Are Affinity Credit Cards Practical?

Affinity credit cards are credit cards that donate money to a pre-specified person or organization based on how much you use the credit card. Usually for legal reasons the exact percentage of money donated through the use of an affinity credit card isn’t disclosed, but this relatively new breed of credit card has been gaining popularity amongst many different groups of people.

But are they really practical? Let’s take a look at the issue by analyzing two of the major groups of affinity cards and the user base they cater to.

Sports Team Affinity Cards

These are credit cards that are co-advertised by the bank offering them and the sports franchise they benefit. A portion of the money you spend using the credit card goes to support the franchise. This portion usually isn’t specified, but most analysts believe it to be in the 3-9% range.

The credit card user doesn’t get any direct benefit from using the credit card, but the reason that these cards are popular is that in general sports fans like the idea of knowing that they’re doing something to directly support their franchise (especially fans that don’t buy tickets or merchandise).

Educational Institution Affinity Cards

Most major universities in North America now have their own affinity credit card, which they allow representatives from the credit card company to sell to students directly on their campus. Once again these cards do not directly benefit the students that use them, but a lot of students seem to like using these credit cards.

It’s a little more difficult to pin down the exact reason that this category of credit cards are popular, as most people would agree that students don’t have the same regard on average for their university that sports fans do for their team. Nevertheless, these credit cards are also widely popular, and becoming more so with each successive generation of students that go through the university.
So what does this tell us? Well, for starters, it tells us that no affinity credit card, no matter how high the percentage, is practical in any sense of the word. The whole point of affinity credit cards is that they do not benefit the user directly, and instead benefit the company that has partnered with the credit card company to create the card. This can be a sports team, a school, a restaurant or any other organization.

Now there are credit cards that do directly benefit the user, such as a cash back credit card, or a card that offers bonuses through a specific organization, but these are not affinity cards – affinity cards are cards where the bonus that would normally go to the user is instead donated to the organization.

So should you use an affinity card? Well the answer, like so many other things, is maybe. If you’re looking for a credit card that will directly benefit you in the near future, then you should stay far away from affinity credit cards.

If however you’re looking for cards that have low to no annual fees, low interest rates and you like the idea of helping out your favorite sports team or other local organization, then an affinity credit card might be for you.

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