Eco-friendly Credit Cards: Ethical Opportunity or Cash Cow for Banks?

Posted on 10. Feb, 2009 by in Environmental ethics

Caroline Poynton asked:

In a capitalist market seemingly obsessed with profit, the green bandwagon suddenly appears rather ironically overloaded with corporates. Whether it be big brand retailers, such as Tesco, or technology giants, such as BSkyB, business now seems intent on winning the hearts and pockets of the environmentally-conscious consumer.

Financial-services firms are the latest businesses to show a keen interest in the environment, with several banks now launching ‘green’ credit cards. Barclaycard, for instance, is introducing its ‘Breathe’ credit card in the summer. Made from PETG – a recyclable and more environmentally friendly alternative to the usual PVC – use of the card will also help generate funds for carbon-reduction projects. In the first year of its launch, Barclaycard has promised to donate £1m to environmental initiatives, with 50% of its profits from the card going to green causes thereafter. In addition, Breathe card holders can enjoy a preferential annual percentage rate (APR) of 5.9% on purchases of environmentally-friendly goods and services.

Other banks are keen to compete. Virgin Money is also developing a green card, which it claims outdoes Barclaycard because it is bio-degradable rather then merely easily recyclable. The Co-operative bank has also long offered a range of affinity credit cards. With its Greenpeace card, for instance, the bank promises to donate £15 when you open the account, plus 25p for every £1 you spend on the card and 25p for every £100 you transfer to the card.

It all sounds very nicely in tune with current concerns over climate change. But it seems unlikely that a bank would go green purely out of a shared concern for the planet. Factor in other evidence, such as recent announcements that both Virgin and Barclaycard intend to charge customers £10 and £20 respectively just for not using their credit cards and you begin to wonder – is there a catch to the banks’ swing to green?

With growing interest in green issues, banks may wish to do something environmentally ethical if only to improve their brand reputation or consumer loyalty. There is, however, undoubtedly an opportunity for banks and other institutions to make an easy profit out of this burgeoning interest in the planet’s welfare. For instance, Barclaycard’s Breathe card has a typical APR of 14.9% (reduced to 5.9% on environmentally friendly products). This rate is below market average, but still not as good as some other offers currently in the market. Barclaycard’s own Simplicity credit card, for instance, has a best-buy rate of just 6.8% and there are still many opportunities in the market for 0% balance transfers, which may prove far better value than an eco-friendly card, if you don’t pay your balance off in full every month.

You may be delighted to hear that you can now get a credit card which will make donations to charities that you care about at no cost to yourself. But you still need to carefully evaluate the different credit card options to ensure that you are getting the best deal. If your overriding concern is the environment, then you should consider whether the bank has a good track record generally on environmental and ethical issues. If not, you may wish to make your donations through another party. Alternatively, by choosing a cheap credit card deal with a different provider, you could use the savings to make donations directly to the environmental cause of your choice.

“The environment is of prime concern to many people today, so seeing financial institutions donating to green causes will please many people,” said Sophie Neary, product director at BeatThatQuote.com. “You still need to be diligent in taking on any credit card, though. You need to weigh up all the benefits against any potential costs, whether those are higher rates or hidden fees. An eco-friendly card may not be the right option for everybody.”

There is one clear positive aspect to these latest offerings though. Banks are listening to their customers like never before and while profit will always be the imperative, we consumers have never been in such a powerful position to drive the market in ways that suit our pockets, rather than the banks’.

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