While many card companies waived transaction fees for Haiti donations, some are considering waiving fees on charitable giving permanently.
Shortly after the earthquake in Haiti, credit card processors Visa, MasterCard, Discover and American Express all agreed to waive their interchange fee — a charge ranging from 1 percent to 3 percent of each transaction — on donations to some charities so that all money would be directed to Haitians in need. (SeeHaiti disaster brings out charity scams)
Bank of America followed suit shortly thereafter. While the action satisfied some lawmakers who were urging the change, a number of charity officials and political action groups are calling for credit card issuers to waive fees on charitable donations permanently.
“In this economy, giving was down last year over 5 percent — the biggest drop in 50-something years of trending the data,” says Sandra Miniutti, a spokeswoman for Mahwah, N.J.-based Charity Navigator, an organization that evaluates charities. “So if there’s something that can be done in the recession to help boost giving to charity, and it’s not having to come out of the donors’ pockets, that would be tremendous.”Charitable giving is big business. The GivingUSA Foundation, a philanthropic research and education association based in Glenview, Ill., found that charitable giving in the United States had reached $307.65 billion in 2008, the last year for which final numbers are available. But when that number was adjusted for inflation, the amount Americans doled out to charities had actually declined by 5.7 percent in 2008 — the largest drop The GivingUSA Foundation had recorded since it started tracking the data in 1968. In an independent analysis, Huffington Post, a news website, estimated that credit card companies make approximately $250 million a year from charged donations. Obviously, charities would instantly benefit from that money if it was made available.
Political action group MoveOn.org agrees. After protesting the transaction fees taken from donations to Haiti, the organization took its efforts a step further, urging its 5 million members to sign a petition to ask card issuers to waive fees on all charitable donations in the future. The organization plans to collect the signatures and forward them to the chief executive officers of Visa, MasterCard, American Express and Discover. Representatives of Visa, MasterCard, American Express, Discover and Bank of America all said there were no plans at this time to waive fees for charitable donations permanently.
Following a precedent
The move by credit card issuers to cut transaction fees on charitable donations isn’t a novel one. In her push to get credit card issuers to waive fees for Haiti donations, Democratic Rep. Betsy Markey of Colorado pointed out that major credit card companies waived fees in 2004 following the tsunami that killed more than 200,000 people in Southeast Asia.
But not every credit card company has taken a reactive approach to waiving fees in light of disaster. McLean, Va.-based Capital One has been waiving the transaction fees for charitable donations consistently since the fall of 2008.
Capital One partnered with Bethesda, Md.-based philanthropy website Network for Good to give cardholders a forum for researching, selecting and donating to charities. Under the agreement, Network for Good makes sure the money gets to the charity of a cardholder’s choice, while Capital One takes care of all transaction fees on donations made through its No Hassle Giving website.
“This wasn’t set up in any kind of reaction to a crisis,” says Pam Girardo, a spokeswoman for Capital One. “This has been around, and it will continue.”
Also, unlike other credit card companies who are waiving fees for a select number of organizations providing aid to Haiti, Capital One lets cardholders choose from 1.2 million charities from the database of GuideStar, an organization based in Williamsburg, Va., that gathers information on nonprofit organizations across the nation. Since the No Hassle Giving site was launched, it’s generated more than $1 million in donations. Not surprisingly, that number has soared since the Haiti crisis. “We’ve now seen an 850 percent increase in donations year-over-year, comparing January 2009 to January 2010, with one week yet to go in January 2010,” says Girardo.
Though Capital One has had other programs in the past that benefited nonprofit organizations, including affinity card relationships in which a percentage of transactions made with a card are donated to a particular cause or organization, the No Hassle Giving site is the company’s greatest effort by far, Girardo says.
“We cover the transaction cost for every donation so that 100 percent of the donation can be delivered to the charity or nonprofit,” Girardo says.
As good as that deal may sound for charities, credit card companies do end up leaving money on the table when they eliminate transaction fees. But Capital One looks at it as a benefit to its cardholders that separates it from other credit card issuers.
“There are real hard costs associated with making an online credit card donation or an electronic payment and we are pleased that we can cover that for our cardholders,” says Girardo. “We believe this will generate greater loyalty so we become the card of choice for our customers.”