Gift of a new charity credit card from Virgin

CHARITY-LINKED credit cards have been established in the UK for many years and currently generate in excess of £15 million each year for worthy causes.

This week Virgin entered the market with its own charity card giving customers the ability to select the beneficiary of their choosing. The new card is the first product launch from Virgin since it acquired its banking licence earlier this year. So how does it compare?

With most charity credit cards your donations benefit a single specific cause and the way in which the donation is made and the amount given can vary greatly from card to card. For example, some cards will make a one-off donation when you first use the card and then a small percentage of your spend thereafter.

With the British Heart Foundation card from MBNA, the charity receives a 50 payment when a card is first used; similarly the World Wildlife Fund and the National Trust both receive a 40 donation upon first use within the first three months. The Virgin card doesn't make any initial donation, but that's not to say that it represents a poor deal for charitable organisations.

Where the Virgin card comes out on top is that it gives 0.8 per cent of your spend back to the charity of your choice every time you use it, and uniquely, the donation is increased to 1 per cent if you gift aid your donation (compared to an average of just 0.25 per cent from most cards). Another big plus point with the new Virgin credit card is that you're not restricted to donating to a single charity; you can select your chosen charity but change it later.

The interest rate of 12.9 per cent APR is very competitive compared to the average rate of just over 18 per cent, so it's not just charities that are getting a good deal with this plastic. The combination of being able to gift aid donations and change your chosen charity will make the card popular in what has become a stagnant sector of the credit card market.

• Andrew Hagger is head of communications at Moneynet.