Choices abound for giving to charities by credit cards, but make sure you watch the fees and get your tax deduction
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Resolving to give a little more to charity? Or maybe make a year-end donation to a special cause — and get a last-minute tax deduction?
If you’re planning to use a credit card to make a charitable donation, you have many choices — both in choosing the right charity for your money and in selecting your donation method. In addition to going directly to the charity, donors may use specialized charity gift cards, portals run by charity aggregators and donation websites offered by the credit card issuers themselves.
“It’s neat how many wrinkles have been invented in the tech age for charitable giving,” says Renee Irvin, associate professor of public policy and philanthropy at the University of Oregon.
When it comes to giving by credit card, no matter what format you use, “It’s all about the fees,” says Matthew Viola, senior program analyst for Charity Navigator. A good rule of thumb when donating via plastic is pay no more than “2 to 5 percent,” he says. “Anything above that, and I would caution you don’t want to go that route.”
Want to find the best fit for your next donation? Here are six popular options, along with tips from philanthropy experts:
1. Direct donation via credit card
Want to put that donation on credit? Just whip out your card and go online to your charity’s site, or call its toll-free number.
Advantages: It’s quick, it’s easy, and you have the card bill to substantiate your gift. You can also earn points and rewards, says Barry Picker, CPA/PFS, of Picker & Auerbach CPAs in New York City.
During special promotions, some cards will waive processing fees or contribute to your donation.
Credit cards also offer consumer protections in cases of card fraud or security breaches. And card donations are identical to cash or checks, in terms of deductibility, says Leslie Lenkowsky, professor of public affairs and philanthropic studies at Indiana University.
What to watch: Credit cards processors charge a fee for all transactions (including charitable gifts) that comes right off the top. The average is about 2.7 percent, says J. Charlene Davis, associate professor of marketing at Trinity University in San Antonio, Texas.
If you’re using a charity website, make “sure you’re donating to the charity” you intend, says H. Art Taylor, president and CEO of the BBB [Better Business Bureau] Wise Giving Alliance. (Good resources to verify charities and get background on their work include Charity Navigator, CharityWatch, GuideStar and the alliance’s Give.org.)If you want a deduction for your donation, make sure the organization is a valid, tax-deductible charity, says Picker. And the date that counts? “Technically, the defining date is the when they run the card,” he says.
2. Charitable gift cards
These work just like regular gift cards, except the recipient uses the card value to make charitable donations.
Some gift cards can be used with a number of charities, allowing the recipient to choose a cause they value. Others, often sold by the nonprofits themselves, are good only at that charity or its related organizations.
Advantages: Charitable gift cards can offer a menu of nonprofit choices, and donors can often split the card value among several groups, if they like.
For last minute gifts with meaning, many gift cards can be delivered instantly by email.
Some third-party gift-card issuers let buyers personalize cards with their own photos. And often, they allow buyers to opt out of sharing personal information with the charity.
If you time it right, you may be able to find deals where the gift-card issuer will add value to the card above what you pay, says Davis.
FYI: The card purchaser, not the recipient, gets any applicable deduction, and it’s pegged to the gift card’s purchase date, not the recipient’s donation date, says Picker.
What to watch: Find out who’s backing those charitable gift cards, says Taylor.
Stick with charities you trust and reputable third-party aggregators. Ask about fees, says Viola. “There will always be processing fees,” he says. “And sometimes there’s a fee for the card itself.”
Find out if or when gift cards expire, if there are fees for nonuse and ask when donations are disbursed to charities. There can be a lag time with some gift cards.
3. Credit card giving portals
Want to give via plastic? Your card might have a special online site for just that purpose.
[Want to find out what your favorite card offers? To bypass scammers, search your card issuer’s own website or call the number on the back of your card.
Advantages: Charity menus are often lengthy, including causes for almost every interest, including some that don’t take credit cards on their own sites, says Towson.
Depending on the site, donors may be able to search for organizations by ZIP code (to give locally) or keyword (to give to a particular kind of cause, such as food banks), says Candy Culver, director of marketing for JustGive.
You’ll get an electronic receipt instantly, and the charge will show up on your card bill.
Also, under certain circumstances, card issuers may waive transaction fees, add to your donation, or offer extra point, miles or rewards. (For example, Capital One waives all transaction fees on donations made through its portal, according to its website.)
Those looking to avoid mailing lists can often choose whether to share your information with the charity.
What to watch: With card-specific portals, you can typically use only that issuer’s credit card.
As with gift cards, ask when donations are distributed to charities, as well as the total on processing fees. Before giving, verify you’re on your card’s site, not a look-alike or sound-alike site, says Viola.
4. Charity aggregator sites
There are nonprofit groups that specialize in making giving quicker, simpler and easier for both donors and philanthropic groups.
Aggregators operate their own websites, and their networks can include a stunning variety of charities.
Advantages: Aggregators offer a wide selection of nonprofits. Groups are also often searchable by name, ZIP code or cause.
Networks can include small nonprofits whose own sites don’t accept your card brand, “so you can still donate to them,” says Viola.
And third-party aggregators frequently allow donors to choose what, if any, personal information is shared with the charity.
What to watch: Always ask about fees, and when the donations are actually disbursed to charities.
Also find out what information the aggregator shares with charities, says Lenkowsky.
If you want a tax deduction, make sure the aggregator is a qualified charity, because that’s the group you’re making that donation to, says Picker.
5. Donating points, miles or rewards
Can’t snag the flights or merchandise you really want? You may be able to donate those points, miles or rewards to your favorite charity.
Advantages: “It’s easy, and you don’t have to change your behavior,” says Davis. You’re taking something you can’t or won’t use and repurposing it for good.
Some groups, especially those that help people with serious illnesses, use points and rewards to help families offset travel costs for treatment, she says.
Certain cards also offer special benefits for participating charities. For example, Discover has “10 charitable partners” that accept monetary donations through its Cashback Bonus rewards program and charge no fees on those gifts, says Towson. “The charity gets 100 percent of the donation.”
What to watch: Not every philanthropic organization is set up to accept points or miles, so choices could be limited.
Ask how the organization uses rewards, Taylor says.
When card issuers convert points or miles to cash, the resulting value may be less than you anticipated, says Davis. Be clear on exchange rates, conversion fees and transfer fees.
To avoid scams, stick to the card’s own website if you’re donating card rewards, says Viola.
FYI: Donations of points or miles are not tax deductible, but cash-back rewards most likely are, says Picker. “But check with your own tax professional,” he says.
6. Giving while spending with affinity cards
If you have a credit card that’s co-branded with your favorite charity, a small percentage of your total spending is gifted to that charity.
Advantages: Giving happens automatically. “It’s passive, convenient,” says Davis.
And a charity imprint on your card is also an ad for the organization.
What to watch: Find out what percentage of your spending actually goes to the cause.
Also examine how this card’s interest rate compares with what you could get elsewhere. “Many people do carry balances,” says Taylor. “You want to make sure you’re getting the best rate.”
Then do the math: Based on last year’s card spending, how much would your charity get? And what would you pay in interest?
FYI: You don’t earn a deduction for donations that result from affinity-card spending, says Picker.