Sunday, 29 January 2012

Lloyds Bank



At first, I was outraged to read this piece about Lloyds pulling out the credit card market:

www.telegraph.co.uk/finance/personalfinance/borrowing/creditcards/9035963/Lloyds-Bank-pulls-out-of-charity-credit-card-market.html

particularly as it had followed hot on the heels of the news about Royal Bank of Scotland CEO Stephen Hester's £963,000 bonus. However, according to Martin Lewis from moneysavingexpert.com, charity credit cards do not give good value for money - typically you'd need to spend £100 for the bank to donate just 25p.

Martin (he and I are on first name terms; he's one of my Facebook friends!) He advocates the following method for giving more money to charity via your credit card:

Step One. Get a top cashback credit card

Cashback credit cards are very similar beasts to charity cards; yet rather than paying the charity, they pay you a small percentage of every spend made. However the big difference is that the best cashback cards pay you substantially more than charity cards give your chosen good cause; this can be up to £5 per £100 spent. So switch to one of these (see the Top cards section later) and you get more and can then donate it.

Step Two. Donate the money via Gift Aid so the charity can reclaim the tax.

If you donate money to a UK charity, provided you're a taxpayer, then tick the 'Gift Aid box' on the donation form, and the charity can claim back the tax you paid on that money when it was earned. This means for every £1 a basic rate taxpayer gives, the charity actually receives £1.28, and it doesn't cost or impact you in any way (read the full charity giving article).

This is actually even better than standard tax relief at the moment. The basic rate income tax rate dropped to 20% in 2008, which would mean a charity should receive £1.25 per £1 donated. However, the Government's implemented a 'transitional tax relief' to bump this up by 3p, to £1.28, until 2011.

Compare this to what happens with the charity cards. There the donation doesn't qualify for Gift Aid tax relief; so for every £1 that goes to charity, the charity only gets the £1, nothing more.

For higher rate taxpayers, Giftaid works even better. Declare the donations made on your self-assessment tax return, and you can claim back the rest of your tax too. This is an EXTRA 25p per £1.00 you've donated; meaning donate this too and in total your charity receives 50% more than it would have done without any Gift Aid relief.

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