The Finch Formerly Known As Gold

25 April 2006

Red is the new platinum

Target already has a Red card which kicks in a percentage of your spending to a school of your choice.

Now American Express is getting into the Red act, with a card that donates a portion of your spending to the Global Fund to Fight AIDS, Tuberculosis and Malaria.

This qualfies as a Good Cause, and Amex deserves a cheer and a half, maybe two, for coming up with this program. Why not three cheers? This is why:

Every credit card offer has some kind of deal where you get free things or money back, and a good way to choose a credit card is to calculate the exact percentage cash back that you are getting. For example, if you get one Air Mile for every dollar you spend, and it costs 25,000 Air Miles to buy a domestic flight in the United States (say, $400-500 max), then you're effectively getting between 1.6% and 2.0% off of your purchases. ($400/$25000)

In my experience, most credit cards offer effective discounts of 2-3%. The RED card gives 1-1.25% of your purchase value to the Global Fund, and there are no other discounts. Two things are eminently clear: (1) American Express is not hurting at all from this, as they are offering a lower implicit discount than that on their other cards; and (2) Your donation is real, since that 1% going to the Global Fund would eventually be cash in your pocket if you used any other card.

You are making a donation to the Global Fund every time you use the RED card. So why don't you get a receipt for a tax deductible charitable donation? Because American Express is getting it. Which makes the RED card little more than a way for American Express to get money out of you, foolish consumer.

Which is no surprise, really: whatever my old high school gets from my Target card isn't deductible either. And if you don't itemize deductions, this probably doesn't matter. Still, if you're wanting to get maximum value for your dollar, you should donate directly to the Global Fund and charge that donation to Amex RED.

(Via The Consumerist, more cynical than I.)

Posted at 2:15 PM to Common Cents