Wednesday, April 19, 2006

SOME BANKS UTILIZE “AFFINITY CREDIT CARDS” TO COUNTER PREDATORY LENDING

1. Harming the Earth: Several mega-banks have been targeted by activists concerning environmentally destructive projects they’re funding.
Better mega-banks: After a prolonged campaign spearheaded by Rainforest Action Network (RAN), JP Morgan Chase (owns Chase and Bank One), Bank of America, and Citibank adopted a new lending policy last spring that addresses global warming and deforestation, and recognizes the rights of indigenous nations.

Worst performers: Currently, RAN is poised to launch another campaign targeting other mega-banks that haven’t adopted the policy, including Wachovia, Wells Fargo, Merrill Lynch, Morgan Stanley (owns Discover), and Credit Suisse First Boston. RAN is also separately targeting Wells Fargo for financing illegal logging in Indonesia and Credit Suisse First Boston for funding an environmentally destructive Shell oil pipeline project on Russia’s Sakhalin Island. The pipelines are likely decimate the island’s fishing industry, which is the sole means of income for many locals. They could also damage habitat of the endangered western grey whale. Visit http://www.ran.org/ for more information.

3. Predatory lending: Predatory lending is 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. In the case of credit cards, banks may market cards to these groups that “contain hidden transfer charges, exorbitant late fees, and exploding interest rates,” according to the Center for Responsible Lending (CRL).

It’s not just target groups that suffer from such practices. A Woodstock Institute report states that “the intricate web of penalties and fees implemented by the credit card industry may be one of the key factors for the high level of indebtedness among Americans. In January 2005, the average US household had seven credit cards and carried a balance of $14,000, the highest level of debt ever.”

Better mega-banks: To avoid predatory credit card practices, the Woodstock report indicates that you may be better off choosing cards from credit unions, rather than any of the mega-banks. “Credit cards issued by credit unions have similar purchase interest rates but come with fewer fees, lower fees, lower default rates, and conditions that are much clearer” to the consumer, it says.

Consumer Reports magazine looked into the fees and penalties imposed by mega-bank credit cards in its November 2005 issue. Its list of top ten most consumer-friendly credit cards includes: Town North, First Tennessee National Bank, Pulaski, Simmons First National, Target National, BB&T, Franklin Templeton Bank & Trust, RBC Centura, Commerce, and Zions.

Worst performers: Most mega-banks engage in predatory credit card practices, according to Consumer Reports. While CRL says that most have cleaned up their acts in terms of predatory mortgages and loans, the Association of Community Organizations for Reform Now (ACORN) is still targeting Wells Fargo. Though ACORN says the bank has corrected many of its predatory practices, it says Wells Fargo still has not made reparation to victims of its predatory loans. ACORN also claims that the bank charges African Americans and Latinos higher loan rates than Caucasians.

Affinity Cards

Affinity cards are cards issued by a major bank that also bear the logo of a select charity or nonprofit. Each time you use an affinity card, the issuing bank donates a set amount to the charity/nonprofit.

The average contribution to the nonprofit from such cards is half a penny for every dollar you charge or transfer, according to Bankrate.com. Affinity card profits can add up for a charity or nonprofit when many people use the cards.

However, since affinity cards are usually connected with a mega-bank, your money also indirectly supports any problematic practices of that bank. 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

Perhaps the greenest affinity card available is the Working Assets Visa card, which donates ten cents with every purchase to your choice of one of 50 nonprofits. It offers a 9.9 percent APR, with no annual fee. Working Assets also aims to serve as a progressive political force, dedicated to giving its customers the opportunity to speak out on critical public issues through its action Web site, http://www.actforchange.org/, and long-distance telephone program. Recent actions included a call to Apple Computer to take back its used products (it recently agreed to take back old iPods). Each month, Working Assets customers generate over 80,000 calls and letters to politicians on social and environmental issues, says the company.

One caveat: Working Assets Visa is issued by MBNA, which has made large contributions to the Republican party and has been accused by consumers of predatory practices. The card used to be issued by Fleet One, but MBNA purchased the Working Assets program from Fleet.

Michael Kieschnick, Working Assets president, believes that the good his company does offsets any negatives from its association with MBNA: “Even though we did not select MBNA and have explicitly opposed their primary legislative agenda, we do believe that our program contributes significantly to progressive social change. Our credit card itself, since inception, has generated about $6 million in donations to progressive causes,” he says.

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