(MONEY Magazine) – What is the price of civic pride? How about 14.7%? But only if you carry a balance on your Hometown MasterCard.

Just when you thought credit-card companies had run out of gimmicks, you and your neighbors have become targets for the latest version of affinity cards. As defined within the industry, affinity cards are associated with schools, clubs or charitable organizations and offer cash rebates or other benefits to the sponsor-based on the cardholder's spending-rather than to the cardholder. The card pushers have convinced several cash-strapped cities that such cards can be a dependable source of revenue to help politicians keep a lid on taxes. These cards are not restricted to local residents, though they may have little appeal for nonlocals, who can usually get better credit terms from a standard card.

Plano, Texas pioneered the concept with its card in 1991 and has since been joined by dozens of other cities, including Lebanon, Pa., Person County, N.C. and Porterville, Calif. South Orange, N.J. began offering its card last November. Since then Mayor William R. Calabrese has become a popular guy, entertaining hundreds of inquiries about the program from officials in many areas including New York City, Atlanta and Westchester County, N.Y.

South Orange (pop. 17,000, plus 10,000 students attending Seton Hall University) is a typical card-carrying community. Thus far, there are some 800 holders of its no-fee MasterCard emblazoned with an image of the town's Village Hall. The interest rate on the card is 14.7%, well below the national credit-card average (17.96%). It returns 1% of all charged amounts to South Orange's municipal coffers, and by late March had generated $11,000 for the town. South Orange will use this year's proceeds to improve the downtown area, including refurbishing the facades of existing stores and subsidizing the rents of new merchants. The subsidies could yield tasty dividends. Calabrese says two bakers have applied for the subsidy in order to move into empty storefronts. Currently, South Orange has no downtown bakery.

South Orange's card looks like a good deal for the town and cardholders, but that's not always the case. So if you're considering such a card, watch out for these two affinity-card pitfalls:

-- High rates. So far, rates on the community cards range from 11.5% to 16%. But many other affinity cards have rates as high as 12 points over prime, says Robert B. McKinley, president of RAM Research, and annual fees up to $35. Of course, you can avoid high-interest charges if you pay off your balance each month.

-- Low sponsor income. Sponsor income is often as low as 0.5% of your charges. So make sure that the return your town earns justifies the higher interest you might pay. You could be better off "keeping your old card and writing a check to the government" if you feel like making a contribution to civic improvement, says Ruth Susswein, executive director of Bankcard Holders of America. Also, direct contributions are tax deductible; credit-card purchases aren't. --Timothy Middleton