United Way links card use to donations
'Pennies for Change' adds 1-cent donation to each credit card use
By John Egan | Published: January 30, 2008
United Way of America, one of the country's best-known nonprofits, is trying to raise money from the rise in Americans' use of credit and debit cards.
As of the middle of January 2008, 14 small banks and credit unions around the country –- with more than 100 expected by year's end -– had signed up for United Way's new Pennies for Change program. The program allows customers of financial institutions to automatically donate one penny for each of their credit and debit card transactions. The typical American uses his cards about 20 times a month, United Way says.
United Way aims to capture 1 percent to 3 percent of the 40 billion credit and debit card transactions rung up each year in this country. If the nonprofit gains just 1 percent of the total, that would mean $4 million in annual donations. Aside from their contributions, cardholders of participating banks and credit unions don't pay any fees. The donations will appear as a line item on customers' bills.
Simple charitable giving by credit card
Alex Sanchez, United Way's senior vice president of community impact leadership, says Pennies for Change was established to simplify charitable giving for Americans. "While we all love Bill Gates and Warren Buffet, we can't all be Bill Gates and Warren Buffet," Sanchez says.
Of each penny donated, 55 percent will be funneled to local United Way organizations, which support an array of health and human service projects. The remaining 45 percent will go toward the national organization's development and operation of programs such as Success By 6 and Born Learning.
Initially, Pennies for Change will involve only small financial institutions as United Way works out any kinks, according to Sanchez. Large banks and credit unions will be added later if the patent-pending concept proves successful, he says.
Unveiled in December, the United Way program has drawn fire from critics.
Idea draws fire
"For credit card-issuing banks, mired in the subprime mortgage scandals, a cause-related marketing scheme linked to the United Way represents the highest in corporate financial literacy," Rick Cohen, national correspondent for The Nonprofit Quarterly, wrote in a widely published commentary piece. "Yet it also undercuts the United Way's attempts to increase individual financial literacy -– a key tool in its antipoverty efforts aimed, in the organization's own words, at 'promoting self-sufficiency and strengthening families.'"
Sanchez points out that debit and credit cards aren't "inherently evil." They are "a vehicle of commerce," he says, not "a vehicle of debt." As a safeguard, United Way has instructed banks and credit unions in the program to not let donations push cardholders over their credit limits, Sanchez says.
Detractors doubt other charities will adopt programs similar to Pennies for Change, as they say it yields too little bang for the buck, gobbling up too much administrative time and expense. Bob Evans, managing director of fundraising consulting firm EHL Consulting Group Inc., predicts the United Way program will be "a flash in the pan," failing to uphold good philanthropic practices or to collect a substantial sum of money.
"On paper, it looks great. It's cute. It's nice. Intellectually, it's a good exercise," Evans says. "This is not really encouraging people to be generous donors."
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