Giving charity gift cards? Mind the fine print
As with any gift card, it's important to consider fees, other details
By Vanessa Richardson
Whether you're looking for a tax write-off, a meaningful gift for a loved one or just a way to do a good deed, you may want to consider a charity gift card.
Charity gift cards come in multiple forms. Some are shopping cards whose fee goes to charity. Others are gift cards that are donated directly to a good cause. But know this: These cards' fine print can hold terms that are, well, less than charitable.
If you want to buy a gift card directly from a specific charity, some do offer that option. But if you don't have a specific cause in mind, "pick your charity" gift cards could be the better choice. These cards let you give specific amounts of money to people, who then get to donate to charities of their choice.
As with any gift card, there are some fine-print issues to be mindful of, but if you tread carefully, it can be a win-win situation. Givers doesn't risk being presumptuous in choosing the charity, recipients gets to donate free money to their favorite causes, and everyone gets to feel they're doing a good deed.
"This is taking money that would have been spent for unnecessary gifts, like fruit baskets," says Eric Marks, founder of Tisbest, a Seattle-based nonprofit group dedicated to charity gift cards. "Instead, it's going toward improving the world."
Charity-specific cards somewhat rare
A few of the nation's largest charities -- including United Way and Goodwill Industries International -- give consumers the option of buying a gift card directly from their organizations. United Way, the largest U.S. nonprofit according to Forbes' 2012 rankings, has partnered with American Express on a United Way charity gift card that adds a dose of charity to a traditional open-loop card. United Way receives the $3.95 fee you pay to purchase the card (which can have a maximum value of $200), and the rest is spent however the recipient sees fit. Some regional United Way chapters also offer MasterCard gift cards that allocate $3.75 of the card's $4.95 purchase fee to United Way.
Some Goodwill stores have gift card options, but there's no national gift-card policy, so availability and terms vary from region to region. For example, Goodwill stores in the Seattle area let you go online to buy gift cards up to $50, plus a $1.95 shipping/handling fee, for your recipients to use in their stores. Other Goodwill stores nationwide sell gift cards directly, but you have to buy them at the store and they may or may not be accepted in other Goodwill stores around the region or country.
'Pick your charity' cards give flexibility
If you don't have a specific cause in mind, you still have options. "Pick your charity" gift cards are still a tiny part of the overall gift card industry, but their numbers have risen significantly since they began popping up before the recession.
You buy the cards online; purchasing them is similar to any type of gift card. Select the format the card will be delivered in, either email or snail mail. Load it with a donation value and enter the recipient's information. After getting the gift, the recipients turn into philanthropic donors by going online to the gift card's website and clicking the charity of their choice to receive the card's amount.
Beware the fine print
As is the case with any type of gift card, there are a few fine-print issues both givers and receivers of give-anywhere charity gift cards should keep in mind.
- Fees: Not all the money you donate goes to the charity -- a percentage goes to the group providing the card. For example, depending on the issuer, it may cost up to $5 just to purchase the card. After money is placed on the card, fees for shipping, handling, administrative needs or credit card processing are deducted from that amount. CharityChoice gift cards, for instance, feature a transaction fee of 50 cents per card, a card processing fee of 3 percent and an administrative fee of 5 percent.
- Speed: The money that does go to the charity doesn't always go right away. Some organizations only transfer funds to the designated charities on a quarterly basis.
- Expiration dates: A few have them, meaning that well-meant cash will go to the card issuer, rather than the cause of your recipient's choice. Network for Good's Good Card, for example, expires after just six months. It then takes the unused funds "to train thousands of charities in outreach and help them raise funds online."
- Tax benefits: The card giver gets a tax deduction for the face value of the gift card. The recipient, who designates where the money will go, doesn't get a tax break.
- Varying number of charities to choose from: Some cards let the donor select from varying numbers of charities. Too many could be overwhelming; too few hinder choice.
Not for everyone
All that fine print means it's a good idea first to ask recipients whether they want a charity gift card, says Anthony Giorgianni, associate editor at Consumer Reports Money Adviser. "You're putting the burden on the recipient to decide how to give the money and to research the organizations," he says. "If you're going to give a charitable donation as a present, make sure someone wants it beforehand. If he thinks it's fun to find the ideal organization, then ask him if he wants a card."
Giorgianni says the better option is to ask giftees what their favorite charity is and donate to it directly. "Then all the money goes to the organization. Why have a middleman involved in gift-giving charity?" Or give her cash and suggest she use some or all of it for a charitable donation, with no strings attached. "Then the recipients really have the power to decide where the money should go," Giorgianni says.
Charity Navigator, an independent evaluator of nonprofits, always encourages donors to donate directly, but it, too, offers a charity gift card on its website. Charity Navigator offers the Red Good Card, in partnership with Network for Good, and allows purchasers to load up to $250 in charitable funds. Like other Network for Good cards, the Red Good Card costs $5 to purchase and expires after 6 months. $2.50 of the purchase fee for each card is donated to Charity Navigator to help the nonprofit continue rating other nonprofits.
"It's preferable that the entire donation goes to charity to avoid middleman fees, but we're seeing a growing interest in charitable gift cards," says Sandra Miniutti, Charity Navigator's vice president of marketing. "It's another way people can give back and still have something to put in a Christmas stocking."
|Breakdown of companies that offer "pick your charity" gift cards
||Card purchase price
||Number of charities
|A $0.50 transaction fee per card, a 5 percent administrative fee, a 3 percent credit-card transaction fee
||Officially none but if the recipient does not designate a charity, money goes to CharityChoice’s own 501(c)(3) organization, the Special Kids Fund.
||$5 for a plastic card; $0 for email or print-your-own cards
||4.5 percent for card-processing
||Two years from the date of purchase
|Network For Good
||Handling fee is included in the $5 purchase price
||$1.49 for plastic cards; $0 for email and print-your-own cards
|More than 300
|$1.95 transaction fee and a 3 percent card-processing fee for gift cards that amount to $10 and up
See related: Credit cards quickly fund charities, deliver tax deduction
Updated: December 28, 2012
Three most recent Emerging payment systems: Prepaid, debit, gift cards stories:
- Ready to pay rent with a credit card? – If you could pay your rent with plastic, would you? As more landlords offer that option, renters have to weigh carefully whether it's the best way to pay ...
- Prepaid debit cards: With all the scams, are they worth it? – Prepaid debit cards fill an important financial need for people without traditional bank accounts, but they have fewer protections and are prone to scams ...
- 5 reasons there's a hold on your gift card – While gift cards are convenient for buying all kinds of goods and services, their funds can be subject to holds for a variety of reasons. Knowing about potential roadblocks in advance can help you avoid embarrassing situations at checkout ...