Need a last-minute tax deduction? Try a credit card charity network
Capital One, Discover, American Express programs offer flexibility in giving
We'll forgive you for associating your credit card with
getting instead of giving. After all, buying what you want appears to be a
credit card's raison d'etre. But if card
issuers Capital One, Discover and American Express have their way, you'll start
turning to them first when you want to donate to charity.
For several years now, card companies have encouraged
cardholders to use their online giving portals -- Capital One's No Hassle Giving, Discover Giving and American
Express's Members Give -- when they want to make a donation. Though they
won't release data about how many users they have or how much money has been
donated through the sites, the card issuers regularly promote their services,
especially with an end-of-year holiday advertising blitz.
The idea behind a site such as Discover Giving is that it
"kind of acts like a middleman that provides our card members the
opportunity to donate to their favorite charities using their Discover card,
even if the charity doesn't accept credit cards," says Matthew Towson, a
How it works
First, cardholders find a favorite charity by name, topic keywords
such as "animal rescue" or "homeless" or ZIP code. Because
all three credit card giving sites are powered by Guidestar, the clearinghouse
for nonprofit information, you can select from over 1 million registered
501(c)(3)s; you even get an instant look at each nonprofit's most recent
Once you decide who gets the money, you simply use your
credit card to make a one-time donation or to set up a recurring donation that
repeats monthly, quarterly or yearly.
From there, it gets a bit more complicated. Because the
credit card sites are merely donation portals, your money doesn't transfer instantaneously
to the coffers of your favorite nonprofit. Instead, it's transferred into a
donor-advised fund operated by online charitable giving platforms JustGive (for Discover and American Express) or Network for Good (for Capital One).
These groups, nonprofits themselves, funnel the money to the
right place, explains Andrea Lloyd, director of programs at JustGive.
"Donations come to JustGive and we consolidate everything. Then on a
monthly basis we disburse checks to nonprofits." The transaction appears
on your credit card statement as a donation to JustGive or Network for Good. Your
tax deduction statement comes from them too.
To the cynical, what the card companies get out of operating charitable
giving sites are obvious: the whiff of corporate social responsibility, or the
cachet of being associated with a very fine cause. But for cardholders, are
there real upsides to giving this way instead of just cutting a check directly
to a charitable organization?
Perhaps not, if you're really planning on writing a check.
But if the thought of digging up an address and (gasp!) licking an envelope
stymies you, then donating online through your credit card's giving site is a
smart bet, simply because more of your money gets to the charity.
Every time you swipe your card, the merchant pays a
transaction fee, typically between 2 percent to 5 percent of the purchase price, to the
credit card company. When you're donating to charity, the "merchant"
is the nonprofit itself. "Only 18 percent of U.S. rewards cardholders are
aware that up to 5 percent is deducted from online credit card donations to
cover costs associated with enabling online payments," says Sukhi Sahni, a
Capital One spokeswoman. That can cut your $100 credit card donation by $5 -- not
a lot, but it adds up. On the other
hand, if you give through the Capital One Giving Site, "100 percent of the
donation is delivered to the charity since Capital One covers the transaction
costs for every donation."
The same isn't true for donations through the American
Express and Discover giving sites. Both deduct a 2.25 percent transaction fee
to cover JustGive's processing costs. But according to American Express's Members Give site,
"This transaction fee is similar to or less than the processing fee the
charity would pay if you were to charge your donation with your American
Express Card through any other means (over the phone to the charity, through
the charity's website, etc.)."
Even those sites occasionally waive their fees, often in the
wake of a natural disaster. Lloyd points out that "many of our partners,
including American Express and Discover, support disaster relief efforts in
times of need." After Typhoon Haiyan struck the Philippines, both promoted
fee-free donations for a select list of nonprofits, such as Doctors without
Borders and the American Red Cross. According to Discover's Towson, "We
also waive fees on special events like #GivingTuesday," a national day of
giving in December.
Even if the complex fee situation turns you off, you may
find other benefits to charging your donation at your credit card's giving
portal instead of mailing a check, including these:
Not to be callous, but if you can pile up credit card reward points for doing a
good deed, go for it. By donating with your credit card, you accumulate reward
points or miles at your usual rate.
Small nonprofits -- think your local volunteer firefighter company -- don't
always accept credit cards. They may not even have a website. Credit card
giving portals let you make an online donation no matter what -- and someone
else licks the envelope.
Giving to a nonprofit often means finding yourself on the receiving end of an
endless stream of solicitations for years to come. By donating at a site like
Capital One's No-Hassle Giving, you can determine precisely what contact
information JustGive or Network for Good passes along to the nonprofit: your
name, your mailing address, your email. Or make it totally anonymous.
donation options. Want to skip money and just donate your rewards points? The
American Express Members Give program makes it particularly easy, allowing
cardholders to choose between charging the card or donating up to 500,000
Membership Reward Points at a rate of $10 per 1,000 points. Discover and
Capital One encourage CashBack Bonus or reward points donations, as well. And
because there's no cash involved, your donation won't be hit with transaction
All three sites allow you to make a donation as either a memorial or a gift in
someone's name (Capital One will even give you a holiday card to announce it!).
Funneling all your money through a donor-advised fund such as JustGive or
Network for Good makes it easier to track donations in one spot, even if
they're for multiple nonprofits. Plus, you can cancel recurring donations at
any time online.
Though your donation to Save the Children will show up on
your credit card bill as a donation to Network for Good, it's perfectly tax
deductible, says Jackie Meyer, a CPA and president of Meyer Tax Consulting in
Southlake, Texas. The entire amount you donate through the credit card charity networks is eligible for tax deduction.
"In general, as
long as the end result is to an IRS-qualified charity, there's no problem
contributing via a donor-advised fund such as JustGive." It may be even
easier, since "for each separate contribution less than $250, keeping your
credit card statement with your tax return records is enough proof for the IRS."
For bigger donations,
the IRS wants to see a written acknowledgment from the charity, which JustGive
and Network for Good both provide to donors by email. Good news: You get to
deduct the contribution based on the date you charged it, not the date you paid
your credit card balance. With donor advised funds you even get the added
benefit of donating by Dec. 31 to claim a deduction in the current tax year,
then deciding later which charities will get the funds.
See related: Credit cards quickly fund charities, deliver tax deduction, The ultimate gift: Paying off someone else's debt, Charity gift cards let recipient donate to favorite cause
Published: December 27, 2013
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