If you've spent any time in Fooldom, you've probably seen us outline the many ways that credit card-issuing companies make gobs of money through seemingly unsavory practices. For example, did you realize that if you're late making a payment to one of your credit cards, another card you hold (on which you're fully paid up, or at least not late) can hike your interest rate? And interest rates at some major banks have topped 30% and even 40% for some borrowers. Yikes!
I'm happy to report, though, that some financial services companies are trying to do some good. At coopamerica.org's Real Money nook, I ran across an eye-opening article by Tracy Fernandez Rysavy, who reviews many financial services companies and offers pointers on who's doing what.
What you're funding
The article explains that many credit card-issuing "megabanks" are using the money they make from the interest and fees they charge you to fund some activities you might not like.
On the plus side, the author notes: "After a prolonged campaign spearheaded by Rainforest Action Network (RAN), JPMorgan Chase (which owns Chase and Bank One), Bank of America
On the minus side: "RAN is also separately targeting Wells Fargo
These big banks also give money to political parties and support causes that you might not personally support. JPMorgan Chase is relatively balanced donor between Democrats and Republicans. WashingtonMutual
Predatory lending is another area of concern. Fernandez Rysavy defines it as "a fast-growing practice in which financial institutions use high fees, exorbitant costs, and other unscrupulous lending practices to take advantage of targeted groups -- often the elderly, students, and low-income people." Fortunately, most of the big-name banks have "cleaned up their acts" on this front. (Phew!)
The best corporate citizens
She also mentions several financial institutions that made Business Ethics magazine's 2005 "Best Corporate Citizens" list. Well, the 2006 list is out now, so here are the financial honorees among the top 50:
- Wells Fargo
- Wainright Bank and Trust
- St. Paul Travelers
- American Express
- Sovereign Bancorp
- Nationwide Financial
- Heartland Financial
- Freddie Mac
- Synovus Financial
- First Horizon National
What you can do
If you want to feel good about the credit cards you carry, you have some options. "Affinity" cards, for example, are affiliated with an organization or cause, such as your alma mater or your favorite charity. Each time you use them, a small chunk of change goes to the organization -- and those small sums add up. Unfortunately, as Fernandez Rysavy points out, "Interest rates are often higher than with standard cards; annual percentage rates (APRs) on affinity cards range from 15% to 22%. Many charge annual fees, while most standard cards do not."
One card she highlights has no annual fee and a relatively low APR: the Working Assets card, which supports progressive causes. Here's one I'll highlight -- the Motley Fool Credit Card. It supports your friend the Fool, and it should serve you well, too, since we negotiated the best deal we could on it. Its sharp looks have even been known to turn heads. Note that if you get the right card for yourself, even if it doesn't directly funnel money to causes you care about, it will likely save you money over many other cards. You can always donate the money you save to support your causes.
You might also consider getting a card through your local community investment bank or credit union, since these organizations often do a lot of good serving lower-income people and other underserved groups.
The world of credit cards is much more fascinating than you might realize. Learn more in these articles and at our Credit Center:
- 7 Perks of Plastic
- Credit Score Need a Boost?
- Debt-Reduction Tricks
- Your Neighbor Owes $3,560
- 8 Commandments of Credit
- $24 Billion to Card Companies . for What?
JPMorgan Chase and Bank of America are Motley Fool Income Investor picks. Mathew Emmert's stellar selection of dividend-paying stocks can help you get paid to invest. Find out how with a free 30-day guest pass.
Longtime Fool contributor Selena Maranjian's favorite discussion boards include Book Club, Eclectic Library, Television Banter, and Card & Board Games. She owns shares of no company mentioned in this article. For more about Selena, view her bio and her profile. You might also be interested in these books she has written or co-written: The Motley Fool Money Guide and The Motley Fool Investment Guide for Teens . The Motley Fool is Fools writing for Fools.