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FEATURE ARTICLE - MAY/JUNE 2008

Responsible Credit Cards

There are more options than ever for conscientious credit card users to make a difference every time they make a charge.

When you open a credit card with a bank or credit union, your fees— late fees, annual fees, balance transfer fees—as well as the fees that the merchants pay, provide a profit for the issuing institution. The bank, in turn, puts that money to work in the form of loans to individuals and businesses. The question for conscientious credit card users is whether the banks issuing their cards are sustainable, or are financing destructive projects.

“Community investing and socially responsible banks and credit unions provide the best opportunity for consumers to avoid supporting negative practices,” says Fran Teplitz, Green America’s director of social investing programs. “When you use a mega-bank’s card, you’re bolstering all the things the bank’s loans support, from clearcutting forests to building new coal-fired power plants.”

Since Real Green last looked at credit cards in 2005, several more socially responsible cards have been introduced. Of course, it’s important for all of us to be mindful of our purchases, to minimize debt, and to pay off credit balances in full each month. But if you do use credit cards, it’s easier than ever to put your money to work for change every time you make a charge.

Mega-Bank Madness
If you got a credit card offer in the mail today, chances are it came from a corporate mega-bank. Such banks often fund projects that may not be in line with your values.

Contributing to climate change: There’s no doubt that climate change presents a serious threat—so it makes no sense to continue building carbon-spewing coal-fired power plants. However, mega-banks Citigroup, Morgan Stanley (Discover card), and Merrill Lynch were perfectly willing to finance TXU’s 2007 plans to build 11 new coal-fired plants in Texas. Fortunately, protests from Green America members and our allies helped stop 8 of the 11 plants, but it’s clear that these three mega-banks need to stop funding the climate crisis.

In addition, Bank of America is the funder behind Massey Energy, which has been devastating communities and the environment in Appalachia through its practice of mountaintop-removal coal mining.

Harming the earth: Some mega-banks have been connected to other environmentally destructive projects. For example, five Canadian banks—RBC, Scotiabank, Toronto-Dominion, BMO and CIBC—are bankrolling oil, gas, and forest-clearcutting operations that are harming Canada’s Boreal Forest, according to the Rainforest Action Network (RAN). Canada’s Boreal Forest provides critical habitat for several species and is one of the largest intact forests remaining on Earth.

And, says RAN, Morgan Stanley, Citigroup, and Merrill Lynch provided loan capital for China’s notorious Three Gorges Dam, an electrification project that displaced over 1.4 million people, submerged toxic facilities like factories, and destroyed critical wetland habitat.

Playing politics: Many mega-banks make large political donations to parties and causes that may or may not mesh with your values.

Republican donors: Merrill Lynch, National City Corp., SunTrust, US Bancorp, Wells Fargo, and Wachovia gave primarily to Republican candidates in 2007–2008.

Democratic donors: The majority of donations from American Express, Bank of America, Capital One, Citigroup, City National Bank, Deutsche Bank AG, First National Bank, JP Morgan Chase, Mastercard, Morgan Stanley, and Visa went to Democratic candidates in 2007–2008.

Balanced donors: Campaign donations from ABN Amro and Credit Suisse Group were split 50/50 between Republicans and Democrats in 2007–2008.

F or detailed information on campaign donations from these institutions, visit the Center for Responsive Politics’ Web site, www.opensecrets.org.

Predatory lending: Some financial institutions engage in the unscrupulous practice of predatory lending, or the use of high fees, exorbitant interest rates, and other tactics to take advantage of targeted groups—often the elderly, students, and low-income people. When it comes to credit cards, banks may market cards to these groups that contain hidden transfer charges, high late fees, or exploding interest rates, and they may even send out bills too late for most consumers to pay on time.

Consumer Reports rated several credit card issuers in October 2007 based on interest rates, predatory practices related to interest rates and bill timing, and problem resolutions. At the bottom of the pack were mega-banks like Bank of America, Capital One, Citibank, JP Morgan Chase, Providian, Target National Bank, US Bancorp, and Wells Fargo.

Better mega-banks on predatory lending issues were American Express, National City Bank, and Juniper Bank. And those with the best records were USAA Federal Savings, Navy Federal Credit Union, and a group of other credit unions. The ratings leaders had lower median interest rates and higher customer satisfaction. Credit unions overall are less likely to engage in predatory credit card practices because they are run by members and so have a vested interest in keeping those members happy, while mega-banks have to worry more about keeping investors happy.

The Federal Reserve and Congressional representatives proposed new rules on May 2 that would outlaw certain predatory practices by credit card issuers. The proposed rules are available for public comment until mid-July 2008. To voice your support, visist the Federal Reserve Web site.

Other: Mega-banks may be connected to problems other than those mentioned here. For example, five current and former African-American employees filed a discrimination lawsuit against Bank of America, claiming that the bank limited the employees to minority and low-net-worth clients out of the belief that clients are more “comfortable” working with members of their own race. And Fidelity, Vanguard, and JP Morgan Chase continue to invest in PetroChina, despite the fact that it’s one the largest players in the Sudanese oil industry, helping to bolster Sudan’s genocidal government.

For more information on these and other issues connected with mega-banks, visit our ResponsibleShopper.org.

Affinity Cards
Affinity cards are cards issued by a major bank in partnership with a select organization or charity. Each time you use an affinity card, the issuing bank donates a set amount to the partner organization—averaging half a penny for every dollar you charge or transfer, according to Bankrate.com.

While affinity card donations can add up when many people use them, the cards are generally connected with a mega-bank. Therefore, most of your fees and the fees that retailers pay when you make a purchase with the card support that bank and any of its problematic practices.

Interest rates are often higher than with standard cards; annual percentage rates (APRs) on affinity cards range from 15–22 percent. Many charge annual fees, while most standard cards do not.

Working Assets Visa Card (0% APR first year, then 9.99% apr, no annual fee): One of the best affinity cards offered through a mega-bank is the Working Assets Visa card, which donates ten cents with every purchase to a portfolio of 50 progressive nonprofit organizations, including ForestEthics and Oxfam America. Working Assets plants a tree and donates ten cents to renewable energy organizations like the Rocky Mountain Institute for every tank of gas purchased with its card. And Working Assets also serves as a progressive political force, giving its customers the opportunity to speak out on critical issues through its CredoAction.com Web site.

One caveat: Working Assets Visa is issued by Bank of America, a major funder of dirty coal. “We require a large bank to support a credit card portfolio our size,” says Laura Scher, the CEO of Working Assets. “Our activism (halting 30 coal-fired power plants last year, for example) and our $60 million in donations to progressive organizations give consumers the opportunity to be part of a community of social change. We believe real change can be made through small, everyday acts, like making a call or making a purchase.”

Brighter Planet Visa Card (9.99% apr, no annual fee): Another affinity card that directs dollars to a good cause is the Brighter Planet Visa, which automatically funds a ton of greenhouse-gas reductions through NativeEnergy for every thousand dollars spent through its card. Brighter Planet began as a class assignment in a Middlebury College economics class, and hopes to direct millions of dollars to renewable energy projects.

The card is issued through Bank of America. In explaining its choice to work with a mega-bank, Brighter Planet says: “As the leading issuer of credit cards in the world, we believe that Bank of America offers us the greatest opportunity to reach people and ask them to take charge of climate change by supporting renewable energy development with every purchase.”

Cards Connected to Better Banks
There are socially responsible banks and credit unions that exemplify responsible lending practices—as well as community investing institutions that take the social mission one step further by also investing in low-income populations.

Wainwright Bank Visa Cards (fees and rates vary): Wainwright, a Boston-based bank with a tradition of “socially progressive” banking, offers six different Visa credit cards with different rates and terms. All of these cards are issued and managed by Elan, a financial services company. Steven F. Young, senior vice president at Wainwright, says they “chose Elan because we felt their consumer practices were best.”

Permaculture Credit Union’s (PCU) Visa card (13% apr, no annual fee): Based in New Mexico, PCU is committed to Earth-friendly and socially responsible loans and investments. PCU’s card is issued by the Illinois Credit Union League to anyone, whether or not they are a PCU account holder, though applicants should mention they are “affiliated” with Permaculture Credit Union.

ReDirect Visa (15.15% apr, no annual fee): The ReDirect card is issued by Washington state’s ShoreBank Pacific.Depositors fuel the bank’s lending programs, which enable sustainable community development. ShoreBank Pacific issues the card by way of TCM, which is owned by ICBA Bancard, a subsidiary of the Independent Community Bankers of America.

Your card fees support ShoreBank Pacific’s community investing mission, and half of the card’s proceeds go toward reducing CO2 emissions through Sustainable Travel International’s “MyClimate” high-quality offsets. In addition to a conventional rewards program, the card also earns cardholders discounts at the sustainable businesses listed in regional “ReDirect Guides” for Denver/Boulder/Fort Collins, CO; Portland, OR/Vancouver, WA; and Salt Lake City/Park City, UT. Those businesses that offer Internet purchasing will extend ReDirect discounts to any cardholder. There’s no need to have a ShoreBank Pacific account to apply.

Salmon Nation Visa (15.15% apr, no annual fee): This card, also from ShoreBank Pacific, directs a percentage of its income to growing a community of citizens that practice environmental stewardship of “Salmon Nation,” a bio-region stretching from Alaska to Oregon where wild salmon live. Like the ReDirect card, Salmon Nation Visa isn’t benefiting a mega-bank, and you don’t need a ShoreBank Pacific account to apply.

The Loop Card (11.99% apr, no annual fee): A Visa from Albina Community Bank in Oregon. Profits from this Visa from Oregon’s Albina Community Bank not only support Albina, but one percent of every purchase goes to Portland’s neighborhoods, funding education, health, social services, environment, the arts, or economic development projects. You do not have to have an account with Albina to get the card, and it is not connected to a mega-bank.

Shorebank’s Elan Visa Consumer Card (variable apr, no annual fee): ShoreBank, in the Midwest, is a community development and environmental bank that issues a credit card available to anyone nationwide through Elan, the same company servicing Wainright Bank’s cards, at a rate determined by your credit history.

Self-Help credit union cards (9.95–12.95% apr, no annual fee): Self-Help, headquartered in North Carolina, works in communities traditionally underserved by conventional financial institutions. It offers Classic and Platinum Visa credit cards to members, and through online banking, anyone nationwide can become an account holder and apply. The cards are issued by Self-Help, a community development bank.

For those purchases you make by credit card, using one of these best-option cards can make your charges a force for good.

—Joelle Novey & Tracy Fernandez Rysavy