You may be keeping tabs on those rewards and annual fees, but have you considered ethical credit cards?
A good credit card—in all meanings of the word—can have far more perks (for far more people) than a low interest rate and killer air miles program.
With a new focus on ethical finance and impact investing, many are now considering the impact their borrowing habits are having on the world.
While credit cards may provide you with “green”, they often aren’t.
How so?
For starters, if you’re banking with one of the four big lenders, your monthly interest payments are contributing to the $210 billion pot that’s invested in fossil fuel companies.
Beyond the environmental cost, all major credit card companies have been involved in unethical practices like predatory lending, deceptive fees, intentionally complex financial jargon, and abusive targeting of low-income individuals.
And that’s just the beginning.
If you want to read the fine print on why your choice of credit card matters, jump to the bottom.
But before we dive into green credit cards and socially responsible credit cards, our ‘financial advice’ is this: only apply for a credit card if you can afford the repayments.
Disclaimer done; let’s talk about how each swipe can work for good.
*This post containsaffiliate links
WHY CHOOSE SOCIALLY RESPONSIBLE CREDIT CARDS?
Your credit card looks like a simple piece of plastic, but in reality it’s much more than that.
Oftentimes the negative implications of unethical credit card practices fly under the radar.
There’s no shortage of reasons why you should put some serious thought into the next resident of your sustainable wallet.
The problem with traditional credit cards
To a large extent, the financial returns from mega-bank credit cards (think Citigroup, Wells Fargo, and Bank of America) end up supporting fossil fuel companies.
But they’re not just bad for the environment.
Many have been associated with predatory lending; aggressive sales tactics and abusive terms financially harm those who are already disenfranchised. Between that and hidden charges and fees, each swipe digs that hole a little deeper.
As for credit card success stories—people who get free trips or groceries because they’ve gamed the credit cards reward system—they’re often just a pie in the sky.
Credit card rewards and cashback have to come from somewhere. In most cases, it’s vulnerable folks (like those without the income or credit history) who are taken advantage of by the same financial institutions.
Essentially, retailers raise prices to offset the interchange fees they have to pay on credit card purchases.
Those who pay with cash or a debit card end up paying a premium. Which effectively pays the credit card fee so that eligible premium credit card holders can get their sweet rewards.
While ethical credit cards obviously don’t—and can’t—solve for all the ethical implications of credit cards, they do take steps to boost one’s credit card conscience in other ways.
HOW TO FIND THE BEST ETHICAL CREDIT CARDS
Ethical credit card companies separate themselves from the conventional ones through fair and transparent terms and conditions.
They help you build credit responsibly—and learn about why it’s important in the first place.
To find the most ethical credit cards, keep your eye out for the following:
Certifications:
When shopping for the best socially responsible credit cards, how do you know ethical credit cards are in fact ethical?
This is where certifications come in.
- B Corp Banks who are certified by B Corp must ensure rigorous social and environmental criteria are met.
- Community Development Financial Institution Certified: A designation used for organizations that provide financial services to economically distressed communities and those who lack access to financing.
- Global Alliance for Banking on Values Membership: A network of independent banks working to use finance to support sustainable economic, social, and environmental development.
Customizations:
There is no one-size-fits-all credit card.
Some may have the best no fee socially responsible credit cards while others might offer the best cash back ethical credit cards.
Being realistic with your money and opting for credit cards that can help you grow economically is critical to your financial health.
For this reason, many of these socially responsible credit card companies offer credit cards specifically designed for those building, rebuilding, or improving their credit.
Transparency:
Banking and credit card jargon can be technical and difficult to understand. Breaking down the language barrier is a major step in the right direction.
The more a financial organization is able to share about credit card details, accountability, responsibility, and ethical contributions (tree planting, carbon offsets, community donations, etc.), the better.
Fees should be fair and interest rates should be clearly stated.
Inclusivity and Accessibility:
There are people that have been left out of the world of credit, and on the other end of the spectrum, there are people who have been taken advantage of.
Financial institutions that do their part to ensure their credit card services are accessible to all are as important as those that protect customers by promoting responsible credit streams.
In this case, ethical credit card companies don’t target vulnerable customers or those with poor credit histories. They may also entail security deposits, lower credit lines, and flexible repayment options.
Affinity Cards:
Another alternative for those looking for the best eco friendly credit cards can be found in affinity cards.
These support nonprofits through credit card purchases (much like the Green America credit card). In most cases, about half a penny is donated for every dollar spent.
However, many affinity cards are connected with a Big Bank and may have higher APR fees, so it’s good to do your research before applying.
