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Whether it's the holiday season or just the end of the tax year, there's something about December that makes us want to give. In fact, around 30% of all charitable giving for the year happens during that jolliest month of the year.
While movies like to portray donations made with envelopes full of cash or absurdly sized checks, many regular folks are putting their charitable giving on their trusty credit cards. Not only are credit cards more convenient -- you try fitting a five-foot check on the bus! -- but making your donation via card can have some additional benefits.
Earn rewards while still receiving tax deductions
The most obvious perk to donating to your favorite charity with a credit card is the purchase rewards. Most, if not all, rewards credit cards let you earn cash back or points on your donation. You can even use your end-of-the-year contributions to meet those pesky sign-up bonus spending requirements for the ultimate win-win scenario.
Donating via credit card is generally pretty simple. You can head directly to the organization's website to make your donation. Just select "credit card" when they ask for your payment type.
You can also find the organization's local offices if you'd rather donate in person. Many charities will have a credit card reader on hand for just such an occasion. Just tell the associate how much you'd like to donate and swipe away.
Some credit card companies will even offer a little extra incentive to donate with your card in the form of a donation match. These deals can vary greatly by issuer and time of year, however, so check with your individual card company to see if they'll match your donations.
As with any other charitable donation, be sure to get a receipt you can use when it's time to file your taxes. Donations to qualified organizations can be deducted when you file your taxes, reducing your overall tax bill. Keep in mind that only qualified nonprofit organizations count for deductions. Donations to politicians, school sports teams or clubs, or individuals (e.g., GoFundMe or Ko-Fi) will not qualify as tax deductible.
Watch out for processing fees
It's hardly secret that credit cards are more convenient and secure for making purchases -- and donations. However, there is a major downside to your favorite plastic payment card: fees. Specifically, credit card networks charge processing fees every time you swipe (or insert) your credit card.
From the network's perspective, processing fees are fair payment for their role as money shufflers. Without the network, your payment wouldn't make it from your card account to the bank account of the seller or charity.
These processing fees can range between 1% and 5% of the total transaction amount, and they get added onto the purchase. Many businesses simply roll these fees into the overall cost of doing business, but your favorite charity (which already likely operates on a razor-thin margin) may pass the fee onto you.
Turn everyday spending into donations with a co-branded card
Although the end of the year is a popular time to make donations, many of us would happily donate year-round if we had the time and money. If you wish you had an easier way to give back all year, you may want to check out a charity-co-branded credit card.
Several popular organizations have partnered with major credit card issuers to create rewards credit cards that provide a portion of your purchases as a donation. For example, the World Wildlife Fund Credit Card from Bank of America is not just a cash back card. Opening a new account means $3 for the World Wildlife Fund (WWF), as does every annual renewal. Plus, the WWF receives 0.08% of every purchase made with the card.
Cash tight? Donate unused credit card rewards instead
For many folks, 2020 has been an every-cent-matters kind of year. But you might not have to forgo your annual charitable giving just because funds are tight. That is, not if you have some unused credit card rewards on hand.
It's not the simplest way to donate, but there are a few ways to turn credit card rewards into charitable gifts. For example, American Express has a partnership with JustGiving so you can use your Membership Rewards® points to donate to an eligible nonprofit. Simply create a JustGiving account and link your Amex card. Your points should automatically show up as a payment option.
Another way to donate points is through PayPal. The popular payment processor already has partnerships with many major credit card issuers that let you use your points to pay for purchases. PayPal has expanded this partnership to allow eligible cardholders to use their rewards to donate to hundreds of nonprofits through its PayPal Giving Fund. The points are automatically converted into cash, and 100% of the funds are donated to the selected organization.
Whichever charitable organizations you choose to support this year, consider paying with a credit card. It will definitely help the cause of your choice, and you might just reap the rewards of doing a good deed too.