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Wednesday, April 26, 2006

Trend: Conscious Consumption: (Product)RED Redux

We posted over a month ago here about Bono's (Product)RED, a co-brand of cause-related products (including an Amex card) which put portions of your purchases towards doing a greater good beyond boosting shareholder value.

This fellow blogger at IdLand details some of the fine print:

Make no mistake about it, the donation is from you, not from American Express. Every credit card offer has some kind of deal where you get free things or money back, and a good way to choose a credit card is to calculate the exact percentage cash back that you are getting. For example, if you get one Air Mile for every dollar you spend, and it costs 25,000 Air Miles to buy a domestic flight in the United States (say, $400-500 max), then you're effectively getting between 1.6% and 2.0% off of your purchases. ($400/$25000)

Most credit cards offer effective discounts of 2-3%. The RED card gives 1-1.25% of your purchase value to the Global Fund, and there are no other discounts. Two things are eminently clear: (1) American Express is not hurting at all from this, as they are offering a lower implicit discount than that on their other cards; and (2) Your donation is real, since that 1% going to the Global Fund would eventually be cash in your pocket if you used any other card.

You are making a donation to the Global Fund every time you use the RED card. So why don't you get a receipt for a tax deductible charitable donation? Because American Express is getting it. Which makes the RED card little more than a way for American Express to get money out of you, foolish consumer.

An example should make it clear. Suppose you put $25,000 on your credit card in a given year. Should you use the RED card or should you use an Air Miles card and then give the savings to the Global Fund? Let's see what happens:

The Global Fund got a similar amount of money in each case - but using the American Express card has cost you the value of the tax refund!

See Red at

AKI COMMENT: While this is hardly the worst example of credit card consumer abuse, it is clever marketing, and cleverer math considering that Amex isn't even matching your donation or paying anything whatsoever to grease your consumption and use. AND still getting the tax credit and goodwill value, to boot! Brilliant, really.

As that great pimp/philosopher Bishop Don "Magic" Juan once said: "Don't hate the player, hate the game."

And Elle Macpherson looks very cute spending the very first Amex Red pound at Harvey Nichols! Her shirt reads "Empower(red)". Life is funny sometimes.


El Gaffney said...

bring your RED hat. the tax refund is the premium for looking hip each time you drop it like it's hot. unless this becomes comes a big story. actually either way, this is the do-good short-cut and proves you give back. no one else knows you gave the $400 to charity... now you get the "credit."

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