The new Charity Charge credit card: are you doing good for your cause or for the banks?

There’s a new credit card called the Charity Charge card. Its proposition is simple: 1% of all your charges will go to the charitable organization of your choice (assuming your preferred charity is a 501(c)(3) organization). It’s got no annual fee and seems pretty straightforward. The card is issued by Commerce Bank, which also issues the Sustain: Green credit card, another do-gooder financial product.

If 1% seems low to you, you’re right. 2% cards are widely available, so the obvious reply to this product is, if you want to support a cause, why not get a 2% card and donate the earnings and do twice as much good?

And if you’re the type of person who reads this blog or other blogs in the points and miles world, that’s a legitimate retort. But as you may have noticed when you try to explain this hobby to the rest of the world, most people have no interest in doing something like that, and that the group this card is aimed at. As Charity Charge explains:

Every year, more than $16 billion worth of credit card rewards and cashback points go to waste. We want to take those wasted points and put them to good use.

So this product is aimed squarely at the large segment of the population that will never–no matter how many free trips to the Maldives you take–care about credit card rewards. One of the reasons credit cards can be as lucrative as they are is that most people are not maximizers.  They leave money on the table either by subpar redemptions or by not even redeeming their points. So if this card can get some credit card rewards that would otherwise go unused and give them to a worthy organization, great. You may even know somebody who’d be a candidate for something like this. (Random thought: why don’t they have a $100 sign-up bonus that would go to your charity?) But it goes without saying that this is not the right card for any of my regular readers.

Note that although Commerce Bank is issuing the card, it’s apparently a cobranded card on behalf of a company called Charity Charge, which is a public-benefit corporation, which as best I can tell is a profit-maximizing corporation which claims it’s going to do good. Make of that what you will. It’s not clear to me how Charity Charge will make its money–does it get a cut of the 1%, or is there some other arrangement? It would be nice if Charity Charge would be a little more transparent about that.