Charities jump on gift-card bandwagon

With fees, expiration dates, and other gotchas, gift cards can be more nuisance than gift. And charity gift cards and certificates are no exception.

Charity gift cards are like traditional gift cards, but instead of redeeming them for products or services, recipients use them to make donations. Although sometimes offered for use at a single charity, the cards typically are sold by networks that act as middlemen, forwarding the money when cardholders select from hundreds or even thousands of nonprofits. We’ve seen cards available with values of $10 to $10,000.

Like many other gift cards, charity gift cards usually have fees. Issuers, nonprofits themselves, charge around $5 to buy the cards and another 3 percent to 15 percent when card holders redeem them. Other drawbacks are hard-to-find terms and conditions and expiration dates (after which the issuers take the money for their own operations.)

Most cards can’t be redeemed for cash, and any tax deduction typically goes to the purchaser, not the recipient.

Once a card holder designates a charity, some issuers take up to four months to forward the donation, a delay that charity watchdog American Institute of Philanthropy criticizes as unwarranted.

The cards are becoming popular among nonprofits. Even a major charity watchdog, Charity Navigator, is selling one card, issued by Network for Good. Charity Navigator rejects criticism that the relationship is a conflict of interest. But it also failed to disclose its commission for every card sold, which it says was an oversight and will be corrected.

The one standout is the Kiva gift certificate. It can be used only at Kiva to make micro loans to entrepreneurs in developing countries. Because lenders expect to get repaid, Kiva certificates generally are not tax-deductible. While that sounds like a drawback, it means that recipients can cash out Kiva certificates at any time, preferably after making some micro loans. (Kiva loans have a 96 percent repayment rate.) Kiva certificates have no fees, although they convert to a tax-deductible donation to Kiva itself if not redeemed within a year. Any deduction benefits certificate holders, another rarity.

WHAT TO DO

• Before giving a charitable donation as a gift, make sure your recipient wouldn’t prefer receiving a traditional gift.
• Instead of giving a charity gift card, consider giving directly to the group or groups that ultimately would benefit, perhaps in your gift recipient’s name. You’ll cut out the middleman, along with the fees and other gotchas.
• Before giving a card, check out the terms and conditions, including in online FAQs and help files. Print out copies for your recipient, and keep a receipt for tax purposes.
• If you receive a card, don’t assume that the organizations listed on the issuer’s site are worthwhile. Here's some advice from the Consumer Reports Money Adviser newsletter on how to check out charities.

—Anthony Giorgianni

Comments

[Shari Ilsen]

Thanks for this posting!  To research charities for potential giving, there's also http://www.greatnonprofits.org/ where you can read reviews of nonprofits. The reviews are written by people with first-hand experience with the nonprofit - their clients, volunteers, board members, donors.
~Shari Ilsen
Outreach Director
GreatNonprofits

[rachel]

Another good charity gift card issuer is Charity Choice Gift Cards. Their cards never expire, and the 10% fee goes straight to their umbrella non-profit, the Soecial Kids' Fund, serving special needs and at-risk youth. Two charities for the price of one - pretty good!