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June 13, 2011

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I'm of the "give to a charity using a credit card" group. Not because I believe the arguments in the article of the expenses being roughly the same or credit users being more generous.

1) It is human nature to accept any limitation on a noteworthy act as a reason not to do a noteworthy act. Since giving to a charity using a credit card is better than not giving to a charity, go ahead.
2) On your end, you still get the full benefits of the donation (warm feeling within, tax deduction, etc). If like the author, you can even get cash-back, that's just more money you have for a charitable donation later.
3) While it is probably the most expensive way to donate, it is also one of the fastest. This is especially good if you are responding to a recent call for donations due to a natural disaster or a failing ministry. If you pay via a slower method, it may not be budgeted as a resource to address the immediate need and less "people may be helped" / "animals saved" / "heathen souls preached to" / etc.

Sorry FMF
I don't give to charities that take donations by credit card only. United way started this with our company and was the only way to donate. I give to other charities.

I also don't give to charities with the thought of getting a cash back reward. Makes the giving seem kind of shallow in my opinion.

Also makes you wonder if they get 3% less or 5% less. The CCC needs to make its money some how.

Ask the charity.

I donate to a few charities regularly. Often, I find that it is easier to give by credit card, but I was worried about the fees reducing the donation. I asked one of the organizations if they care and stated that I was going to give X amount either with a check or with a credit card. They did not care either way.

I do it - and it's not for the cash back. It's just an easy, fairly secure way to make a donation that gets the money into the hands of the organization quickly. I realize there is a cost involved, but there are lots of costs involved in operating a charity organization that don't go directly to "the cause" and I fully expect some of my donation to go to those costs, be they keeping the lights on or processing credit card donations.

And, while I agree those fees seem kinda high (it especially irritates me that they are a percentage - does it cost more to process $5000 than it does to process $5?) the fact that banks charge a fee to process CC charges is not unreasonable. They are business providing a service, after all.

I think using cards is fine and I do so. Its easier to donate online with a card. I think making giving easier is a good thing and helps increase donations.

Nothing wrong with making charity easy.

Most charities, just like a business, will have an administrative overhead cost that's assumed that will cover items like this.

Also, most charities will agree that they'd rather pay a little extra in fees in order to have barrier free ways for people to give to them.

I'm sure they appreciate when people donate with check or cash, but I would by no means say it's obligatory.

I was recently facing this exact situation and decided to go the check route. I just didn't like the idea of the organization not receiving the full amount we intended to give.

While having the credit card option may increase overall donations by making the giving process easier, that doesn't address the question being posed here since the individual has already decided to give, and is deciding on a payment method. Perhaps credit card donors can add the 3% to their donation amount.

I think the method (and cost) of payment is less important that that you're giving at all. I believe charities accept credit cards since it brings them more revenue, but I would be skeptical if it's their only accepted method of payment.

Your $1500 donation would result in $75 cash back. If you're really worried about the charity getting full value just donate $1575 instead?

To the people that think a rebate reduces the "meaning" of a charitable gift, do you not claim charitable contributions on your taxes? That is cash back in your pocket just like a rebate. You can give whatever amount you want to the charity, calculate it after tax and any rebates if you really care about the exact amount it costs you.

The important thing to realize is that credit card transactions are NOT more expensive than other types, the cost is just more visible. In the retail world it is a general rule that credit/debit transactions are cheaper than checks which are cheaper than cash. Yes, cash transactions are more expensive to process than the other two. It requires a lot of overhead to accept, process, count, store, and deposit cash, so much so that it is cheaper for large retailers to just pay the interchange fee.

I don't know how it works in the non profit world but I wouldn't be surprised if a similar situation exists. It may very well be that you are saving them money by pay via credit card.

Keep in mind that if you donate with any other method, they usually have to pay someone to process that as well. If you send in a check, someone has to open the mail, receive and notate the check, and take it to the bank for deposit. If you donate in-kind goods or services, the organization still has to incur some sort of cost to coordinate your donation with its needs.

This is the standard first principle of economics: TANSTAAFL (There Ain't No Such Thing As A Free Lunch). Anything you give to a charity will have some sort of cost associated with it. No way around it. As stated, most charities will be totally fine with this.

I think I heard it costs $13 or $17 to process a payroll check...I wonder what it costs the charities to process paper checks. It's probably not a small sum either.

I suspect a lot of people also donate more when they can use a credit card so that would offset any fees the charity has to pay.

I never give to charity with a Credit Card, if I can help it.

I go to a pretty big church, and they do offer online giving. But when I asked the girl in charge of this kind of thing, she said they definitely prefer to get checks.

On a $1500 donation, a charity will lose at least $45 to CC fees.

If you can write or mail a check, do it. Charities get 100s of checks, so the cost to go to the bank and deposit them is minimal, and they probably do a bank run a couple times a week anyway.

OK, one exception ... as far as I can tell, CC rewards aren't considered "taxable" ... so, theoretically, if you wanted to give, say, $1500 to a charity, you could bump that up by 5%, take the tax deduction for the extra amount, and get the cashback. It's sort of a neat little loophole.

As long as the charity is receiving what you intended to give them, I think it's fine. But if you intended to give them $1500 with a CC, just know that you'll have to bump that up a bit for them to actually get all of it.

Sorry, one followup to my comment ...

If you are going to use the tax loophole I posted above, make sure that the CC transaction fee is either the same, or less than, the amount you're getting as cashback. If you're earning 2% cashback, but the fees are 3%, then it's better to just cut a check.

Sorry to ring in late but I'm a professional fundraiser so thought I might have some added insight.

Like any other business, our charity pays a set cost plus percentage of the transaction (.40+3%ish). To me, that's just the cost of doing business. But at the same time, I don't particularly like losing 3% of $10,000 when someone gives via credit card. So I prefer those larger donations via checks. Yes, checks do take time to process as well, but every check takes the same amount of time to process so the bigger it is, the less time spent per dollar raised.

On the other hand, charities love, love, love people who give on a monthly basis. It really helps us build a stable base of income and helps us be able to project our future revenue and therefore plan better. From a purely frugal point of view, it's easier for me to process one $1200 check rather than 12 $100 checks or 12 $100 cc payments yet I know the way the human mind works and, just like many business models, I'd rather get you into that recurring pipeline.

So, in general I would say, larger donations ($1,000+ in my org's case but it varies by the size of the org.) should come via check and smaller can be cc. But, like many other commentators mentioned, the best thing to do would be to call the organization. At some of my previous organizations, cashing a check was extremely laborious and we vastly preferred ccs.

And let me use this moment to explain a few other principals of being a good donor to an organization. I do not mean to offend anyone but one $50 donation to large charity (any charity that spends over $500k per year) is NOT a good investment on your part. I will spend more than $50 processing your donation, researching you and asking you for more money. It is much, much better to choose just one or two charities in your life and give them larger donations--it's more cost effective and will allow you to really feel like you've invested more into that charity and perhaps find other ways you can be involved with them.

If you really want to give a one time, anonymous gift, don't give the charity any of your information. On the one hand it drives me, as the fundraiser crazy, but on the other hand, you'll save both of us a lot of time in the long run because I won't be stalking you for another gift. The best ways to do this are via cash or money order (which would probably allow for some sort of tracking for the IRS), a charitable account via your investment house, or via your attorney.

By far the most inefficient, costly way to give to an organization is when their telemarketers call. As a fundraiser, I truly believe this is a practice that needs to die--if we are lucky, we end up with about 50 cents on the dollar for this money. You can help kill this atrocious style of fundraising by NEVER giving over the phone. If you like the organization, hang up the phone, go to the website and donate there. If you've never heard of the organization before--beware! it is highly likely that most of the $ raised won't be used for charitable purposes. This is so un-secure and inefficient. Do not do it.

And those people asking you to sign up for monthly donations on the streets in big cities. Take all my warnings in the previous paragraph and multiply them by 2. Do not do it. Walk to your computer, give there.

Finally, as donor's we need to be responsible for carefully vetting charities that we give to. There are many, many bad charities out there that use less than 10% of their money towards their charitable causes and use the rest to enrich themselves (people often use military or police causes--so be especially aware of them). You can check a charity's information on Charity Navigator, you should read their annual report and see what they do, etc.

As chief fundraiser and operations director for my non-profit, I will be the first to tell you that % spent on overhead is not as important as you might think (and that most charity's try to game the system) but you should look for a minimal standard--nothing over 30% on admin costs (it seems high, I know. Most people think 10% but depending on the type of organization, that can be nearly impossible to meet--Charity Navigator for instance has different standards for different types of orgs). Once that standard is met, do your best to evaluate the organization's effectiveness. If they're in your community, their effects should be noticeable. If it's international, it's more difficult but try to find out what people are saying about them, etc.

I could go on and on and on but that's my more than 2 cents for now. Ultimately, don't let these things discourage you from giving but use them as guides to be wise stewards. Giving can be such a joy--I've seen it time and again and I hope you all get involved with charities that you feel an absolute joy in giving to!

Thanks soners, that was a interesting reflection.

It just means more profits for the banks. When you get a charity card, the charity automatically receives between £5 and £25. Yet after that most charity cards donate a paltry 0.25% of everything you spend. That is just 25p per £100 spent.

soners --

GREAT thoughts! I'll be highlighting them in an upcoming post so all my readers get a chance to see them.

Reading the information disclosed from the fundraiser's comment, I really can't believe the way the people who run these donations spend the people's money, which were supposed to support some people who really need the money. If I understood right, they spend over 50 dollars just to process the money and to contact the donor, in order to stalk him and persuade to give more money...This approach really makes me rise a brow...

As a startup non-profit organization's CFO, the only thing I haven't seen mentioned yet is a lot of payment methods (PayPal, off the top of my head) do offer reduced transaction fees to 501(c)3 organizations. I'm not sure if or how much the major CC's discount their fees in this instances, but it is something to consider. I'd be surprised if every charity out there had to pay Visa the same fee that WalMart does.

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