Tuesday, September 20, 2011

Avoid Putting Charitable Contributions on your Credit Card

Every time you make a purchase (or a donation) on your credit card, the merchant is charged a fee (usually around 2%) which helps pay for your rewards programs.  The merchant is making a cost-benefit analysis in accepting your credit card.  There is no ethical dilemma in using your card.

When it comes to a charity, however, things are a little bit trickier.  The assumption is that you are donating money to a charity because you want them to have the money.  If you were planning on donating $100, why do you want the charity to only get $98 of it?  Even if you would give the reward from the card to the charity, if you only 1% back on purchases, the charity still loses out (P.S - you should be getting more than 1% on every purchase - click the link).  It just doesn't make sense

Here is what to do:  

Send a check

Almost every charity that has a website that can accept credit cards also has a link that says "contact us".  In that link they will usually have an address that you can send the check to.  It takes a little more time to fill out the envelope and the check but you obviously care enough about this charity to send them money in the first place.  If you think you are the type of person who won't give money unless it is easy or you will forget about it later, by all means give through your credit card.

Note :

This is not true about tuition payments, even if you care about the institution.  If you have to pay $10,000 a year, whether it is a check or credit card, that is a different situation.  If you get back 2% on every purchase, you would get back $200 so your tuition becomes less expensive.  You might want to send a check anyway to save them money but that is a personal decision.  If you have no obligation to give any money then the charity loses out when you put the contribution on your card.