The RED Card: American Express pretends to be charitable
You will soon hear, if you haven't yet, that Bono is pushing something called RED, an American Express card that transfers 1% of all spending to the Global Fund to fight AIDS, TB and Malaria.
On the surface, it's a brilliant idea. Since RED is like any other credit card offered by American Express, you're not subsidizing a charity's advertising campaign with your donation. 100% of your donation is going to the Global Fund.
Plus, the distinct red color brands you as a socially aware consumer and lets you show off your charity without having to say a word. It's a card you want to be seen using, and every time you use it, you are marketing it.
I love just about everything about it.
The devil is in the details.
It bothers me a little bit that this card is a worse deal for consumers and a better deal for Amex than the average credit card. Most reward cards are giving you 1-2% back on your purchases, whether in cash, air miles, gift cards, etc.. So at 1-1.25%, Amex Red is a little bit stingier than the others.
And then there's the matter of the charitable donation. It's your charitable donation (since you're choosing to forgo other rewards by using Amex Red), but Amex is collecting the tax deduction. So the effective reward rate drops down to about 0.75-1% depending on your tax bracket.
This is a little bit obscene. This is not corporate responsibility, its an illusion of corporate responsibility designed to give consumers a worse deal. Amex RED doesn't cost Amex anything - in fact the margin on Amex RED is higher than on their other cards. And you consumer could give more to the global fund if you just got a cash back card and sent the money on to the Global Fund directly. AND you could deduct it on your tax return!
The very same offer could have been pitched like this: Instead of giving money to charity directly, give it to Amex. Amex will take a cut, and then give the rest to the charity of your choice. And they get the tax receipt. It doesn't sound quite as responsible as the way they're pitching it.
The concept of a card that lets you give to the Global Fund every time you make a purchase is good. But on the part of the credit card company, it has to at least be profit neutral. Otherwise its just a scam.
So when you see someone using Red, don't let yourself think He's socially responsible and giving to the Global Fund. Think, He's an idiot, and giving to American Express.
posted by p @ 01:38
7 Comments:
You're linked.
Thanks for the insight. While I agree that consumers should be aware of what's going on, I personally would use the card anyway because I do not have the discipline to count up the "discount" received from using a regular credit card, and donate it. This makes it very easy, and to me, worth letting AmEx make some extra profit.
But again, it's always great to know that smart consumers are watching these things, so people can make an *informed* decision rather than being swept away by the marketing message!
Yet another bad move from Bono on helping Africa. Here are some great comments on Bono's efforts in Africa from Ed the Sock.
http://www.edthesock.com/News/article/sid=87.html
http://www.edthesock.com/News/article/sid=88.html
Thanks for that. It's really annoying- but on the other hand, how else could we convince so many people to donate to the Global Fund? Let's admit it: they probably wouldn't donate otherwise. Which is better- poor lose, rich lose, or poor win, rich win (assuming we in the middle are going to get it up the hoo-ha anyway)?
Great points overall, but the math doesn't work. You're not actually getting 1.6%-2%, you're getting 1%. Your example requires the correct cost of airfare, which you're inferring based on experience. However, when you look at the fact that to get a giftcard to the Gap, LandsEnd, Babies R Us, etc. The cost is 100 points/$1 or $1 gift/$100 spent = 1%.
The Red card is not only a great idea to support a cause that isn't getting enough money, but is exactly in line with all the other rewards options as well.
I agree with your logic. The only thing I think it lacks, is the non-financial benefits calculation. Every time one uses a RED card one a. brings up the topic of what the card is and subsequently b. discussion of AIDS. Yes, financially it seems to not make sense to use the card vs. make direct donation. But the card spurs activism by targeting people's desire to seem good and proactive, and fosters discourse while bringing the AIDS issue to the forefront. Thus making the fight more real, as opposed to it being just something distant celebrities (BONO) or bureaucratic (read: ineffective) world organization try to do.
1% on the red card is not necessarily bad at all.
First, 1% is the default reward for reward cards. It is the rate that the crappier reward cards offer and often the rate that the better cards offer when you do not buy products in whatever category the cards specialize in. You won't find many high-rate cards which go much above 1% unless they are pushing a specific product category. The economics behind those category-specific rewards cards are kind of interesting... the rewards often seem to focus on offering incentives to buy more of the same.
Second, the rewards on the red card will always be "redeemed", unlike the rewards with some of the other cards. The reward rates can be a bit higher than the red card because there will always be people who do not bother redeeming the reward. It would be entertaining to know how many people do not use those miles, hotel stays, coupons, shopping cards, online shopping credits, gift certificates, and miscellaneous other rewards.
I would be a bit more preoccupied with how the Africa fund handles the money. This does not seem designed to make huge profits for Amex.
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