A few weeks ago, I posted a diary and parody at Daily Kos called Have Yourself a VISA Highmark Christmas about those obscene new healthcare gift cards. Since then, I discovered another new scheme that benefits PayPal, credit card companies, and other businesses to "skim some off the top" of your holiday giving Â- charity gift cards. I studied several companies engaged in this business that cheats non-profit organizations out of a percentage of the donations made through their sites. As a donor, a fund-raiser, and a skeptical thinker, I am appalled by these so-called services. Admittedly, companies have been making money off of NPOs through online charity gift certificates and processing fees for donations made at organizational web sites since start of the new millennium. However, the recently-introduced charity gift card concept is already booming and is poised to change the face Â- and profitability Â- of fund-raising far into the future. An excellent introductory article on the subject is Charities take a page out of the retailers' book by turning to gift cards from the Herald Tribune in FL. Favorable media coverage is surely fueling its growth. I found hundreds of links about charity gift cards, almost all of them positive. For example, the New York Times covered the topic three times in three weeks. In one piece, Gift Cards Go Philanthropic, the NYT reported (emphasis mine):Charity? Not to me. It's just a crock! Donations climb at holiday time. Don't need a gift card if you want to share, Or to show you care.
THIS year, the use of gift cards, many of which are bought and redeemed online, has merged with another venerable holiday tradition: charitable donations made in the name of gift recipients. And in a new twist, several groups are offering charitable gift cards that allow the recipient to choose the organization that will receive the money given in his or her name. "This is a movement that has exploded in the last year," said Trent Stamp, president of Charity Navigator, a Web site that uses information from federal financial filings to evaluate charities. ... Philanthropy and commercial products are converging with each other," said Daniel B. Goodman, president of Charitygiftcertificates.org. "We're offering a charity gift card as basically a commercial product." His group has been offering online gift-card buyers the option of letting the recipient choose where the money goes since 2004, Mr. Goodman said, and last year it received about $100,000 in such donations. But the introduction of plastic cards this year for gifts of $50 or more, he said, led to a big increase in donations, with more than $200,000 coming in before Thanksgiving.Charity Choice, the site name of charitygiftcertificates.org, charges a $0.50 transaction fee per card plus a 10% administrative fee. Since Charity Choice is non-profit, these fees are probably used to pay staff, and to maintain the web site and database. However, it means when you donate $100 through this site, you are gifting $89.50 to your target charity and $10.50 to Charity Choice. It's in the cards: A way to give to charity and to loved ones, an article from the Philadelphia Inquirer covering the TisBest charity gift card noted:
The company charges $3.95 per card, regardless of the amount purchased, and credit card companies take 3 percent. So, for a $100 gift card, $3.95 goes to TisBest, $3 goes to Visa or MasterCard, and $93.05 goes to charity. The entire amount - $100 in this example - is tax-deductible for the purchaser.Then, from a LaunchPR New Product Post:
Erik Marks, founder of TisBest says, "If every person gives just one $25 TisBest Charity Gift Card instead of some other gift, we would contribute $4.2 billion to charity-that's enough money to protect 66,000 square miles of rainforest or to provide healthcare for one million uninsured children."
TisBest is incorporated in Washington state and (despite its designation as "non-profit" in the Tribune article) is listed as a "commercial fundraiser" Â- in other words, it is a for-profit company. Math time! $4.2B Ã · $25 per donation = 168M cards $4.2B x .03 fee per card = $126M for credit card companies 168M cards x $3.95 fee per card = $663M for TisBest If Marks is correct... $4.2B Ã · 66,000 sq. mi. of rainforest saved = $63,636 cost per sq. mi. saved $4.2B Ã · 1M children receiving healthcare = $4,200 cost per child OK, where am I going with this? $126M for credit card companies + $663M for TisBest = $789M spent just to buy cards $789M Ã · $63,636 = 12,398 ADDITIONAL sq. mi. of rainforest that could have been saved Â- or 19% more! $789M Ã · $4,200 = 187, 857 ADDITIONAL children who could have been provided healthcare Â- again, 19% more! Music Time! I was delighted to work with the very talented and funny nonnie9999, owner of Hysterical Raisins, to produce Charity Crock, our first parody together. It's based on the 100M+ seller Jingle Bell Rock written by Joe Beal and Jim Boothe and first released by Bobby Helms in 1957.
Uh-oh, time to get serious again. A typical charity gift card set-up is found at Network for Good, which is an NPO, but uses PayPal to process charitable gifts. Network for Good states in its FAQs:Charity Crock (original lyrics here) Charity? Charity? Oh, what a crock! Charity scam and charity sham! Glowing and crowing, investors have won, Now the flimflam has begun. Charity? Not to me. It's just a crock! Donations climb at holiday time. Don't need a gift card if you want to share, Or to show you care. Don't waste one dime! This is some crime! Don't dock your gift this way! Jingle bell time is a swell time, To go giving using checks to pay! Ask your friends, call them up, Knock on their doors, Spread the word 'round the block! Mix and a-mingle, find out on your own. Time for clarity... Give to charity, But, not this jingle bell crock!
In fact, since inception more than 400,000 donors have contributed more than $100 million dollars using the Network for Good giving system! ... There is a 4.75% tax-deductible fee for credit card/PayPal transactions, which you can add or deduct from your donation. This fee is used to pay banks, credit card companies and other administrative costs. Network for Good does not profit from fees. There is a $10 fee for online check transactions containing one donation and a $5 fee per donation for transactions containing multiple donations. The online check fees cover check vendor, banking and administrative costs, and Network for Good does not profit from them.Hmmm... 4.75% means that $4.75M has been "contributed" to PayPal and 400,000 donors means that between $2M and $4M has been "contributed" to Network for Good. Millions of people turn to the highly-respected Charity Navigator for information before donating to NPOs, which now offers its own charity gift card, called the Good Card purchased through... you guessed it, PayPal. Good Cards expire after 12 months. Unclaimed funds are given to... ummm, Network for Good. (I might add that Charity Navigator is not without its critics, either. This blog post, Ever taken a good look at Charity Navigator? is typical of those I've read with concerns about Charity Navigator.) Speaking of expired charity gift cards, the Herald Tribune article, Charities take a page... says:
Those who monitor giving say the gift cards are a good idea but they just do not know the impact they are having or who benefits most from them. While most in the nonprofit industry like the idea, some say there needs to be more research in how they work and where the money goes. (quote continues...)
(...quote continued) "These things are so new; there's no one keeping track of the numbers," said Holden Karnofsky, founder and executive director of givewell.net, a new online site founded by a group of financial analysts that examines charities and makes recommendations on the best. Karnofsky said he likes the idea of charity gift cards, but would like to have more information about how well they work, the fees they collect and where the money goes -- especially if a recipient never redeems it. Gift cards "are notorious in general for being so profitable because so many people don't use them."TisBest cards expire in three years, with unredeemed funds going to "charity." Charity Choice says their cards do not expire, but...
Should your gift recipient not designate a charity, we will utilize the gift for a 501c3 charitable organization.Other charity gift card sites failed to mention expiration dates at all or were similarly vague about them if they did. I suppose it's possible, as charitable organizations themselves, that some of them would claim the funds from unused cards as their own... Oh, yes, that Inquirer article, It's in the cards..., also reported that the TisBest cards aren't really even cards!
To keep waste down, TisBest doesn't send a physical card. It sends an image of one by e-mail, along with a redemption code that's entered online. Those who want to physically send something can print the card and mail it.I found this to be true at several other charity gift card sites. At this point, to my way of thinking, I would be paying mostly for the "privilege" of giving my loved one a link to a charity gift card site! OK, the sites do maintain records of your donations for you. However, most of us can't donate that often or to that many charities and probably don't even claim them as deductions. How difficult is it to enter a few donations on a spreadsheet, track them in a checkbook program, or even write them on a scrap of paper for the tax folder? Washington's Secretary of State, Sam Reed, issued this news release on December 5 regarding donations made through Washington entities last year called New report shows paid solicitors keep nearly half of charitable donations. Here is an excerpt:
Â" Solicitors raised a record $640 million dollars on behalf of charity; Â" They returned 52% of those donations to their charity clients Â- the greatest percentage returned since 2001; Â" Twelve of the 108 fundraisers listed gave more than 65% of the money they raised back to charity; Â" Other fundraisers returned only pennies for every dollar donated.(Note: By quoting this report, I do not mean to imply anything about the specific organizations mentioned in this article. I include it because it offers a summary of typical returns to charities from paid solicitors, gives scope to the magnitude of the subject, and offers helpful resources for potential donors.) Look, is this really what you have in mind when you decide to donate to a favorite charity in your name or someone else's? Do you truly want 20%, 35%, or even 48% of your money going to other charities or to PayPal, credit card companies, and other for-profit groups? It's fine to donate money to a cause, but it's certainly easier than donating time. If you want to do the right thing, make an effort get a little involved to make sure ALL your money goes to the right place. It's not hard to ask a person what their favorite charity is or to find out by asking friends and family. Then, mail a check, print out your own fake gift card, and jot yourself a note for April 15. Won't you feel better for doing it the "old-fashioned way" now that you've thought about it? Please, skip the charity crock!
