Don’t Donate to Charity With a Credit Card: Here’s Why

Your donation can go to more places than you think.

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Key points

• Credit card companies charge fees to process credit card transactions, even for non-profit organizations.
• These fees can easily exceed 3% of the transaction. So if you donate $100, the nonprofit may have to pay $3 or more in fees.
• You can use credit card rewards to donate without worrying about the same fees. Or withdraw your rewards and donate directly.

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Donating to a good cause is one of those things in life where everyone wins. A charity or non-profit organization receives financial assistance, which is always welcome. Plus, you get that warm, fuzzy feeling indoors. Everyone wins.

However, when that donation is made with a credit card, they are not the only winners. The credit card companies are winning too, and they’re probably doing it at the expense of charity.

Trade Fees Strike Again

Few things in life are free. And that extends to credit cards, even if you’re not the one paying.

Have you ever wondered how credit cards with no annual fee are still profitable for issuers? How can they give you that $200 sign up bonus without charging you money for the card? It’s because they charge merchants.

Every time you use your credit card to pay a merchant, or, in this case, a non-profit organization, the merchant pays a fee to the credit card companies. (Well, in most cases, the merchant pays a third-party provider, who then pays the broadcasters and networks. But that’s neither here nor there.)

These fees vary depending on the credit card companies involved and can range from 0.1% to 3.5% of the transaction. (That’s where “convenience” fees come from when you use a card to pay taxes or utilities.)

Therefore, when you make a donation to a nonprofit using your credit card, the nonprofit must pay credit card processing fees. In real terms, this could mean that they really only see $97 of every $100 you donate.

This isn’t much on a small scale, but it can add up if you’re making larger donations. And of course, for the nonprofit, it can make a world of difference. For starters, many charities subsist on shoestring budgets.

Adjust your donation to compensate

Fees aside, there are a few reasons you might want to use a credit card anyway:

• Security: When doing business online, credit cards are often safer than debit cards.
• Convenience: Mailing a check probably requires having, you know, checks. (Something that goes the way of the VHS tape.)
• Rewards: Depending on the card, you could earn credit card rewards with your donation. At the very least, you may want to earn a sign-up bonus.

If this is the case, it’s still perfectly fine to use your card. But consider paying the fees yourself by adding an extra 2% or so to your donation.

Don’t Forget Credit Cards Can Mean Debt

Another thing to keep in mind before making a donation with your credit card is that you shouldn’t donate more than you can pay off quickly. If you carry the balance past its due date, it will begin to accrue interest. And given the high interest rates on most credit cards, that interest will add up quickly.

Any warm, fuzzy feelings, and any potential tax benefits, will quickly fade in the face of the high interest rates you’ll pay when the bill comes due. Stick to making donations that you can back up with cash.

Consider donating rewards instead

While using your card to make a donation directly may incur additional fees, you may be able to use the rewards on your card to make a donation. Multiple card issuers give you the option to redeem credit card points for charitable donations.

Donating with your rewards won’t usually give you the best value per point (redeeming for travel is often the most valuable route), but it can be a good way to use up extra points if you don’t have travel planned or are canceling a card.

You can also donate credit card miles through various third-party organizations. For example, Miles4Migrants uses donated miles to help refugees.

Your cash back rewards can also go to charity. Several issuers allow you to redeem rewards directly into your bank account, then you can take that cash and donate it directly to a local charity. Not only will they get the full donation, meaning no credit card fees, but donating to a local nonprofit can often have much more impact than donating to a much larger national or international organization.