Credit Cards: New Revenue Source for Public-School District
Public-school officials in Volusia County, Fla., have tapped in to what fund raisers in other nonprofit domains are finding to be a lucrative source of new revenue: so-called "affinity'' credit cards.
When parents or supporters of the school system make purchases with a special Visa card, a percentage of the transaction will be donated to a local business-education alliance, which will then distribute the funds to the schools.
And because credit-card use is so widespread, school officials say, the agreement reached this month between Futures Inc. and First Florida Banks Inc. in Tampa may offer a simple--and painless--way of producing much-needed new funding for school improvements.
"If everything else is equal,'' said Jim Surratt, the district's superintendent, "why not use a card that supports the public schools?''
While Volusia County is believed to be the first school system to benefit from "affinity'' credit cards, the concept is not new. Nationwide, hundreds of organizations--from the Sierra Club to Continental Airlines--are netting profits from similar credit-card arrangements.
For nonprofit groups, affinity cards represent a new avenue of fund raising. For corporations, the special charge plates are proving to be an effective marketing ploy.
Typically, the organization receives a fee for allowing its name or logo to be embossed on the card. In many cases, the group also receives an amount equal to a percentage of the purchases made with the card, or a fee for each special card ordered or renewed. In return, the bank has a new source of potential credit-card customers.
The consumer, meanwhile, gets to support the group of his choice at what backers of the idea call "no additional cost.'' And because organizations are usually able to arrange for group rates, affinity-card holders often can obtain better interest rates or perquisites than they would if ordering the cards on their own.
Affinity credit cards have been available for about seven years, said Greg Wright, a sales coordinator for Maryland Bank of North America, which handles 500 affinity accounts. He noted that they have become much more popular over the last three or four years, with about an equal number of for-profit and nonprofit groups having "endorsed'' cards.
"In most cases, they're seeking funding for a particular purpose,'' he said.
'Quite a Market'
The Volusia County card was the brainchild of Futures Inc., a nonprofit foundation that raises additional funding for local schools and will be responsible for the financial arrangements of the new venture.
According to Mr. Surratt, the group was able to convince a regional bank that there were enough people wanting to support the school system to make the arrangement profitable.
"The bank recognizes that our foundation has the potential forfounding a large affinity group,'' he said. "We have over 40,000 students. We're quite a market.''
The superintendent said the system hopes to attract 12,000 new accounts by the end of the first year--which could yield as much as $240,000 for Futures Inc.
"You have money available that you would normally not have available through tax sources,'' he explained.
The new funds, he said, will be distributed by Futures in the form of grants to teachers for curriculum development, and to schools for teacher-recruitment efforts and student-recognition programs.
The Volusia program has been widely hailed in Florida. "The fact that the money will be earmarked for public schools is what's new and exciting,'' said Mary Anne Havriluk, a spokesman for the state's department of education.
And, since the program was announced last week, several school districts have contacted First Florida about issuing their own cards.
Action at Colleges
Though precollegiate educators contacted last week were generally unfamiliar with the affinity-card concept, fund raisers at the collegiate level have been more actively involved in such programs. From Brown University to the University of Colorado, higher-education institutions have seen the credit-card option as one new means to offset rising costs in a time of contracting budgets and reduced tax incentives for giving.
At Old Dominion University in Norfolk, Va., for example, school
officials said they hope this summer to convince the 40,000 members of
their alumni association to use MasterCard, Visa, or Choice cards with
their school emblem.
Alphonso W. Knight, the associate director of alumni relations at the university, said the school could make $12,000 next year if 2,000 people sign up when the cards are offered this summer. The bank, too, will make "a nice sum of money,'' he said.
'Spectacular' Profits for Some
For large organizations, the profits from affinity cards can be spectacular. At Ducks Unlimited, a conservation group, 44,000 members have ordered a specialized plate, said Carol Maier, the membership-services manager, giving the organization a net profit of $750,000 in additional money this year. Next year, she said, profits could rise to $1- million.
Though some have criticized the new fund-raising scheme as contributing to the nation's credit-card debt, Ms. Maier and other nonprofit-group officials say that affinity cards have allowed their organizations to draw on untapped sources of giving.
"Money that wasn't earmarked for Ducks Unlimited is making its way here,'' she said. "It isn't like taking money from one hand to pay the other.''
Vol. 06, Issue 34