Giving charity gift cards? Mind the fine print

If you want to buy a gift card directly from a specific charity, some do offer that option. But if you don't have a specific cause in mind, "pick your charity" gift cards could be the better choice. These cards let you give a specific amount of money to a person, who then gets to donate that amount to a charity of her choice.

As with any gift card, there are some fine-print issues to be mindful of, but if you tread carefully, it can be a win-win situation. The giver doesn't risk being presumptuous in choosing the charity, the recipient gets to donate free money to his favorite cause, and both parties get to feel they're doing a good deed.

"This is taking money that would have been spent for unnecessary gifts, like fruit baskets," says Eric Marks, founder of Tisbest, a Seattle-based nonprofit group dedicated to charity gift cards. "Instead, it's going towards improving the world."

Charity-specific cards somewhat rareA few of the nation's largest charities -- including United Way and Goodwill Industries International -- give consumers the option of buying a gift card directly from their organizations. United Way, the largest U.S. nonprofit according to Forbes' yearly rankings, partnered with American Express in 2009 to create a gift card. United Way receives the $3.95 fee you pay to purchase the card (which can have a maximum value of $200), and the rest is spent however the recipient sees fit. American Express says the offer is part of a test program that will run through October 2010 and might be continued after that, depending on sales results. 

Some Goodwill stores have gift card options, but there's no national gift-card policy, so availability and terms vary from region to region. For example, Goodwill stores in the Seattle area let you go online to buy gift cards up to $50, plus a $1.95 shipping/handling fee, for your recipients to use in their stores. Other Goodwill stores nationwide sell gift cards directly, but you have to buy them at the store and they may or may not be accepted in other Goodwill stores around the region or country.

'Pick your charity' cards gain popularityIf you don't have a specific cause in mind, you still have options. "Pick your charity" gift cards are still a tiny part of the overall gift card industry, but their numbers have risen since they were introduced a few years ago. Marks says his organization sold 15,000 gift cards in 2008 and is on track to sell 30,000 this year. (Since its inception in 2007, Tisbest has raised approximately $1.75 million, Marks says.) sold $750,000 worth of gift cards last year, and Network for Good sold $1.2 million.

The cards are bought online; purchasing them is similar to any type of gift card. Select the format the card will be delivered in, either e-mail or snail mail. Load it with a donation value and enter the recipient's information. After getting the gift, the recipients turn philanthropic donors by going online to the gift card's Web site and clicking the charity of their choice to receive the card's amount.

Beware the fine printAs is the case with any type of gift card, there are a few fine-print issues both givers and receivers of give-anywhere charity gift cards should keep in mind.

  • Fees: Not all the money you donate goes to the charity -- a percentage goes to the group providing the card. For example, it costs between $1.50 and $5 just to purchase the card. After money is placed on the card, fees for shipping, handling, administrative needs or credit card processing are deducted from that amount. CharityChoice gift cards, for instance, feature a transaction fee of 50 cents per card, a card processing fee of 3 percent and an administrative fee of 5 percent.
  • Speed: The money that does go to the charity doesn't always go right away. Some organizations only transfer funds to the designated charities on a quarterly basis.
  • Expiration dates: A few have them, meaning that well-meant cash will go to the card issuer, not a cause. Network for Good's Good Card, for example, expires after just six months. (They recently changed it from one year.) It then takes the unused funds "to train thousands of charities in outreach and help them raise funds online." The Credit CARD Act of 2009 -- which also addresses gift cards -- says gift cards can't expire for at least five years after they were last loaded with money. However, those changes don't take effect until August 2010, so in the meantime, it's important to pay attention.
  • Tax benefits: The card giver gets a tax deduction for the face value of the gift card. The recipient, who designates where the money will go, doesn't get a tax break.
  • Varying number of charities to choose from: Some cards let the donor select from varying numbers of charities. Too many could be overwhelming; too few hinder choice.

Not for everyoneAll that fine print means it's a good idea first to ask recipients whether they want a charity gift card, says Anthony Giorgianni, associate editor at Consumer Reports Money Adviser. "You're putting the burden on the recipient to decide how to give the money and to research the organizations," he says. "If you're going to give a charitable donation as a present, make sure someone wants it beforehand. If he thinks it's fun to find the ideal organization, then ask him if he wants a card."

Giorgianni says the better option is to ask giftees what their favorite charity is and donate to it directly. "Then all the money goes to the organization. Why have a middleman involved in gift-giving charity?" Or give her cash and suggest she use some or all of it for a charitable donation, with no strings attached. "Then the recipients really have the power to decide where the money should go," Giorgianni says.

Charity Navigator, an independent evaluator of nonprofits, always encourages donors to donate directly, but it, too, offers charity gift cards on its Web site. Charity Navigator offers the Good Card and the GiveCard, a prepaid Visa gift card with a minimum of $5 set aside for the recipient to donate to a cause of their choice. The remainder of the card's value can be spent on anything else. GiveCards cost between $5 and $10, depending on the card value. Charity Navigator gets $1 of the fee if the card is purchased on its Web site.

"It's preferable that the entire donation goes to charity to avoid  middleman fees, but we're seeing a growing interest in charitable gift cards," says Sandra Miniutti, Charity Navigator's vice president of marketing. "It's another way people can give back and still have something to put in a Christmas stocking."

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