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How You Can Turn Your Credit Card Rewards Program Into Charity Donations

by Guest on September 8, 2011

We all know there are tons of credit cards on the market which offer extra rewards for certain types of spending, such as gas and groceries.

However what you may not know is that a handful of rewards programs give you extra rewards for charity donations, too.

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Here are the 3 most popular rewards programs that I am aware of:

1. U.S. Bank FlexPerks Travel Rewards Visa

As the name implies, this is a travel rewards program. It gives 1x points on regular spending, 2x on the category you spend the most (gas, groceries or airline travel), and 3x points on charity donations. Its annual fee is $49.

This has a tiered redemption structure when you cash out your rewards program. Let me demonstrate this by showing you the first two tiers:

20,000 FlexPoints = Up to $400 ticket value
30,000 FlexPoints = Up to $600 ticket value

As you can see, your rewards program has the potential to be worth up to 2 cents per point (which is amazing) but if you are stuck with a plane ticket that costs, say $405, the value you get per point drops dramatically.

Regardless though, this rewards program will still probably give you a reward value that’s significantly above 1.0 cent per point. That means the 3x points on charity donations will essentially be earning you at least 3% and possibly much higher (up to 6%).

2. Chase Freedom

Chase heavily promotes this credit card so there’s a good chance you already know quite a bit about it. The Chase Freedom rewards program gives 5% cash back in categories which change every quarter. After you exceed $1,500 in spending for the 5% categories during a given quarter, the payout drops to 1%.

During the 4th quarter of 2011, one of the 5% categories is charities. That means in theory, you could earn up to $75 on a $1,500 charity donation, assuming you didn’t spend any money in the other 5% categories that season (which are dining, movies, and department stores).

Because it only offers 5% on charity donations for one quarter out of the year and it imposes a rewards cap, I would say this is not the best choice for a rewards program for charity donations. The card from U.S. Bank would be a much better idea.

3. AAdvantage Mileage Program

Although it’s catered to those who have the AAdvantage credit card, you don’t actually need it to earn these rewards. To the best of my knowledge, you can use any credit/debit card! You will earn miles for every dollar donated to participating charities, when you use this link.

Right now, the USO, Susan G. Komen for the Cure and the National Foundation For Cancer Research are offer 10 miles/per dollar. This is quite good, considering the fact that each mile is usually worth more than 1 cent. The U.S. Fund For UNICEF is also listed but I do not see mention of how many miles are awarded for it. If you are passionate about these particular charities, then getting up to 10 miles per dollar is certainly a very generous incentive.

The Pros and Cons of Rewards Programs for Charity Donations

We’ve gone over the rewards programs, but now let’s review the possible drawbacks that may be involved by using these programs for your charity donations. Let’s look at the pros and cons…

The Cons

1. Processing fees
Without a doubt, the biggest drawback will be the cost incurred by the charity. If they have to pay 2.5% to process your cards, then that means only 97.5% of your donation is going to the charity.

2. Distortion of organization’s financial picture
Like many people, the most important thing to me when considering a charity is its efficiency. Which percentage goes towards the cause and which percentage goes towards administrative and fundraising?

My concern here is that depending on the accounting method used, it might make an organization look slightly less-efficient than it actually is (by increasing the fundraising costs). In turn, this could affect its ratings on CharityNavigator, GuideStar, etc.

With that said, if payments are handled 100% entirely by an intermediary company, then maybe it won’t affect the charity (because the charity would only count the money they get from the intermediary as the donation amount). Ultimately, this is something you will need to investigate if it concerns you, because I do not have the answer.

The Pros

1. Might be more efficient
For smaller charity donations made via check, the amount of time it takes for the charity to open the envelop and manually process the donation also costs them money. So for larger donations I would say check is always the way to go. But for small amounts, credit cards might be more efficient.

2. Rewards encourage giving
Some people say rewards programs encourage spending. Well, if that spending is on donations to good charities, that probably isn’t a bad thing. If the higher rewards plus the added convenience of a credit card means you will be more inclined for charity donations, then in my opinion that’s a positive thing.

This guest post was written by Mike, who is the founder of CreditCardForum. He has been writing credit card reviews for years, including a recent review of the Freedom card by Chase. On the topic of charities, his favorite is World Vision.

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